The Courier & Advertiser (Fife Edition)
Ofgem to invest £25 billion in network
The energy watchdog has vowed to take money out of shareholders’ pockets to improve investment in a green energy network while cutting bills.
Ofgem said households stand to save around £20 a year on their gas and electricity bills under its proposals, which are set to come into force from next year.
Under its plan, Ofgem will halve the rate of return that companies will be allowed to take from their investments.
The regulator argues that companies and investors will still be willing to put their cash on the line to invest in upgrades to the system as the UK’s energy networks are a very low-risk investment.
Meanwhile, the watchdog is setting aside £25 billion for investment in the UK’s energy networks, including those run by National Grid.
There will also be a package of around £10 billion in additional funding which is only available for clean energy investment, but companies will need to apply on a project-by-project basis.
More money may be set aside if Ofgem receives enough good proposals.
The regulator will scrutinise proposed investments and only give them permission if they cut carbon at a low cost to customers. This could include a recently-proposed National Grid project to install electric car charging points up and down British motorways, and innovative solutions such as switching the gas grid to run on hydrogen.
Ofgem will also set aside £630 million to encourage new research and development in green energy.
It is the latest announcement from the regulator ahead of next year’s change to the rules on how much of investment costs networks can pass on to customers.
Ofgem has proposed that the allowed rate of return be halved to 3.95%. Currently around a quarter of the average household’s energy bill goes to pay for the network.
Perth-based SSE said it is “disappointed and deeply concerned”.
Rob McDonald, managing director of subsidiary SSEN Transmission, said: “Ofgem’s draft determination is a barrier towards achieving net-zero and damaging to the green economic recovery.”