In our submission to the 2023 Spring Budget, we set out the policy changes that we believe can help unlock capital investment from energy network companies in a way that will allow the UK to compete internationally.
Overall, electricity demand from the UK economy is predicted to increase from its current level of 330TWh per annum today to up to 500TWh by 2035. To address this, we need to unlock private investment, through our energy network companies, to reinforce the existing transmission and distribution infrastructure, managed alongside smart flexibility markets, to develop our networks as efficiently as possible, ensuring our energy networks have sufficient capacity in place to deliver the power the UK needs.
And that’s where this year’s Spring Budget can make its mark.
Policy reforms can help unlock investment in new network infrastructure so it can be planned and delivered in a proactive, strategic and cost-efficient manner. That’s important to ensuring the UK can connect the heat pumps, electric vehicles and other smart energy technologies needed for our homes and businesses to manage every day energy costs more intelligently as we decarbonise. It’s also important because it will allow us to connect new sources of UK-based renewable energy production, such as wind and solar farms, helping reduce reliance on overseas fossil fuels and mitigate the impact of energy price-driven inflation.
To achieve this, the primary duties of Ofgem, the regulator responsible for making those investment decisions, need to be reformed. It must be given a net zero mandate, enshrined in law or delivered via a Strategic Policy Statement, which sets out its responsibilities in relation to meeting decarbonisation targets. This would ensure Ofgem decisions, made through the price control process, focus on the timely delivery of sufficient network capacity to meet the fast-growing electricity demand from our households and businesses in the next thirty years and beyond.
At the same time, the land rights and consenting process for new network infrastructure needs to be reformed. The current framework, under the Electricity and Planning Acts, is too lengthy, too complex and is incapable of delivering the necessary network upgrades to facilitate the changes required to deliver net zero. That’s why ENA has submitted its detailed proposals to the Department for Energy Security & Net Zero and the Treasury, for how these changes should take place.
The UK is also on the path towards switching from natural gas to hydrogen. It’s important to consider the role of hydrogen investment in the UK’s net zero journey. We think the Government should speed up the development of a business model for hydrogen network infrastructure, with interim measures introduced until that business model is finalised. This vital infrastructure, that will transport and store hydrogen, will be the foundation on which Britain’s hydrogen economy will be built. Without it, the UK won’t meet its climate emissions targets nor the government’s 2030 10GW of hydrogen production capacity target.
Taken together, these key changes can help ensure the capabilities of the GB energy networks evolve with the needs of our economy as it as decarbonises, ensuring we have the right network infrastructure, in the right places, at the right time.
This article was written by Paul McGimpsey, director of Markets & Regulation, Energy Networks Association
