U.K. to Spend More on Energy Network Revamp

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) -- The U.K. is increasing the budget to overhaul its ageing electricity and gas networks to almost €30 billion ($39.3 billion) following complaints about its original proposals published last year.

The country's energy regulator, Ofgem, has published its revised plan which will see €29.6 billion ($38.8 billion) made available between April this year and 2021 for the modernisation, up from the sum of almost €28 billion ($34.4 billion) announced last July. For additional information, see July 18, 2012, article - €28 Billion Grid Upgrade Plan for U.K..

The revision follows complaints from the country's grid operator, National Grid, which argued that it would not be enough to help the U.K. move to a low carbon energy system.

Ofgem said that the bulk of the money, €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. National Grid runs both networks. Ofgem said the funding will allow for the connection of new sources of energy generation such as renewables to the grid as well as boost overall security of supply. Major projects underway include the building of a sub-sea link to connect Scotland -- a major zone for renewable energy projects - with England and Wales.

Another €5.5 billion ($7.2 billion) will only be made available over the course of the new, longer price control period of eight years (April 2013 -- 2021) if companies are able to justify this expenditure. The regulator said that the cost of running and maintaining Britain's energy networks up to 2021 stands at €47.1 billion ($61.7 billion).

Ofgem Chairman, Lord Mogg said: "Ofgem's new and innovative price control -- RIIO -- delivers a sound regulatory environment that protects consumers by attracting the energy infrastructure investment that Britain needs at a fair price. This provides a framework of strong incentives and penalties to stimulate the innovative and efficient operations of Britain's energy companies."

Consumers will be expected the foot the bill for the overhaul with household energy bills set to rise by an average of €15 ($19.6) a year -- almost double the previous estimate.

Transmission companies will be liable for an improved investment fund to help "mitigate the visual impact of new and existing infrastructure". Up to €1.2 billion ($1.6 billion) will be available in relation to existing infrastructure in areas of natural beauty as well as for the 'undergrounding' of new infrastructure.

In 2009, Ofgem published its Project Discovery report which highlighted the 'unprecedented' need for the U.K. to invest in replacing ageing infrastructure, meet its environmental targets and deliver secure supplies.

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