National Grid PLC (LSE:NG.) and SSE PLC (LSE:SSE) are among the grid operators that have been given provisional approval for £24 billion of government funding to enhance UK energy security and support renewable energy transmission, including the largest expansion of the electricity grid since the 1960s.
An extra amount will be added to household energy bills next year to help pay for this, energy regulator Ofgem said, estimating it will lead to a net increase of £24 per household by 2031.
Network charges added to bills are estimated to rise by £104, while the improvements to the energy network will lead to around £80 of savings in the same period.More than £15 billion will be used to maintain and operate the gas transmission and distribution networks.
An initial £8.9 billion will be invested in the high-voltage electricity network, with immediate access also available for an additional £1.3 billion under a ‘use it or lose it’ basis.
This £8.9 billion investment -- made up of £4.2 billion for National Grid, £3.1 billion for SSE's Scottish & Southern Electricity Network (SSEN) and £1.6 billion for Scottish Power -- is the first tranche approved as part of a wider £80 billion investment programme expected over the five-year regulatory period.
Ofgem said the funding aims to protect UK households from volatile international gas markets and the resulting fluctuations in energy bills. It will fund around 80 transmission projects across the country over the next five years.
The grid’s capacity will increase significantly through upgrades to more than 2,700 miles of overhead power lines, as well as substations and related technologies. This will support the flow of electricity from new renewable energy sources.
The announcement was made on the same day that Ofgem’s latest quarterly price cap comes into effect, with a 7% fall in the average customer's bill for the three months to the end of September.
Electricity transmission and gas network projects
Electricity transmission projects include upgrading and expanding existing transmission lines to handle increased capacity from renewable energy sources like offshore wind farms. For instance, new subsea cables connecting offshore wind to the mainland grid.
National Grid is allocating its £4.2 billion to reinforce critical transmission lines and substations across England and Wales, expand offshore wind connections, and modernise the grid with digital and automation technologies.
SSEN is investing its funds in upgrading Scotland’s transmission network, building new substations, and deploying 'smart grid' technologies to support renewable energy integration and improve grid resilience.
Smart grid technologies enable better demand response and integration of distributed energy resources.
Cross-country transmission reinforcements are also getting funding, such as enhancing the Scotland-England electricity interconnector to transfer more renewable power southwards.
Among gas network projects, the investment is going towards the maintenance and modernisation of gas pipelines and compressor stations to ensure safe and reliable gas transport.
Ageing infrastructure is being upgraded to meet environmental and safety standards, with other projects looking to enhance gas network resilience and reduce leakages, contributing to climate targets.