€28 Billion Grid Upgrade Plan for U.K.

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) -- The U.K.'s energy regulator, Office of the Gas and Electricity Markets (Ofgem), has announced proposals to spend up to €28 billion ($34.4 billion) on upgrading the country's electricity and gas networks.

The bulk of the funding, €21.6 billion ($26.6 billion) will be used to upgrade and extend the high voltage electricity network in England and Wales and the high pressure gas networks across Britain. Another €6.4 billion ($7.8 billion) will be held back and made available as necessary over the period of 2013-21. The money will also fund the construction of new sub-sea electricity cables linking England, Wales and Scotland. The electricity projects are seen as vital to the U.K.'s efforts to connect more renewable energy to the electricity grid and curb its CO2 emissions in line with European Union (E.U.) regulations.

Ofgem Chairman, Lord Mogg stated: "As Ofgem's Project Discovery set out, Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies. This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible".

The U.K. is already working on a number of international interconnector projects. In October last year, construction began on a €600 million ($764 million) interconnector cable to connect the electricity grids of Ireland and the U.K.. The East-West Interconnector project, which is being overseen by Ireland's state-controlled grid operator EirGrid (Dublin), is a 500-megawatt (MW) link that will be capable of transporting enough energy to power 300,000 homes when it is completed at the end of this year. For additional information see October 28, 2011, article - Ireland-U.K. Interconnector Project Begins.

In May, the U.K. and Denmark announced plans to connect their electricity grids in order to harness and share power from traditional and renewable energy sources. The U.K.'s grid operator, National Grid plc (NYSE:NGG) (London), said it is working with Danish grid operator, Energinet.dk (Frederica, Denmark), on a feasibility study for the laying of a subsea cable, the first electricity power connection between the two countries. For additional information see May 2, 2012, article - Denmark and U.K. Looking to Connect Power Grids.

Ofgem's new proposals have, however, angered the country's largest grid operator National Grid, which saw the amount of money that will be made available for its planned grid upgrades substantially reduced.

"It is already clear that there are several important areas where Ofgem's proposals differ substantially from National Grid's comprehensive business plan submissions for both transmission and gas distribution," it said in a statement. "While the information currently available is limited, we believe that these initial proposals will not appropriately incentivise the essential investments necessary to provide safe, reliable networks for the U.K. consumer and avoid delays to the achievement of the UK's environmental targets."

It added: "The financing packages proposed do not, on either a stand-alone basis or in comparison with other regulatory outcomes, adequately reflect the increased scale of investment and implicit risk associated with the major investment required in the coming years to build the energy system that our customers will need in the future, whether in transmission or distribution infrastructure."

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