The UK’s energy regulator, Ofgem, has given the provisional green light for a major investment programme to upgrade Great Britain’s energy infrastructure. While this long-term plan is designed to enhance energy security and support the transition to Net Zero, it will be funded by an increase in household energy bills over the coming years.
A £24 Billion Initial Investment in the UK’s Energy Grid
Ofgem has approved an initial £24 billion investment package for the five-year period from April 2026 to March 2031. This is the first stage of a wider programme expected to total around £80 billion. The investment aims to deliver the biggest expansion of the electricity grid since the 1960s.
- Electricity Grid Upgrade: An initial £8.9 billion (with a further £1.3 billion earmarked) is committed to the high-voltage electricity network to increase capacity for renewable energy sources. This will fund 80 major transmission projects, including new power lines and substations.
- Gas Network Maintenance: Over £15 billion will be spent on operating and maintaining the gas transmission and distribution networks to ensure safe and secure supplies.
- Long-Term Goal: The investment is crucial for connecting up to 126 GW of clean power generation by 2030, reducing reliance on volatile international gas markets, and supporting the UK’s clean energy goals.
Impact on Household Energy Bills
To fund this significant infrastructure overhaul, network charges—which make up part of the overall energy bill—are set to rise.
- Projected Increase: Ofgem has revealed that the network charge portion of household bills is expected to rise by approximately £104 per year by 2031. This is comprised of around £74 for the electricity grid and £30 for gas networks.
- Net Cost Argument: The regulator insists that doing nothing would cost consumers more. It estimates that without this investment, bills would be around £30 higher due to the continued cost of paying renewable generators (like wind farms) to switch off when the grid can’t handle their output. Ofgem calculates the net cost of the investment on bills at around £24 a year, or less than 40p per week, by 2031.
- Consumer Reaction: Consumer groups like Citizens Advice have expressed concern about the timing of bill increases, given that many households are already struggling with high energy costs.
Ofgem CEO Jonathan Brearley stated, “Doing nothing is not an option and will cost consumers more – this is critical national infrastructure. The sooner we build the network we need and invest to strengthen our resilience, the lower the cost for bill payers will be in the future.”
Industry Response and Future Outlook
The response from major energy network companies has been mixed, highlighting the balancing act between investment needs and regulatory returns.
- National Grid said it was “pleased to see Ofgem continuing to recognise the need for significant levels of investment” and will review the details to ensure the financial package is “investable.”
- However, SSEN Transmission (part of SSE) warned that the plan “does not go far enough to deliver the investible, financeable and ambitious framework required” to unlock the unprecedented level of investment needed.
The draft determination from Ofgem is subject to consultation before a final decision is expected by the end of the year.
Financing the UK’s Energy Transition
This major public infrastructure programme will create significant opportunities for businesses across the energy and construction sectors. Securing the right finance to participate in these projects or to invest in your own business’s energy efficiency is crucial. Information on government support and finance options can be a useful starting point. Working with a specialist finance broker provides access to a wide network of lenders and tailored solutions. With connections to over 95 lenders, brokers can help you navigate the market effectively.
Key finance solutions for businesses in this sector include:
- Project Finance: For large-scale energy and infrastructure projects.
- Asset Finance: To acquire machinery, equipment, and technology needed for grid upgrades and renewable energy installations.
- Green Finance: Loans specifically designed for investments that have a positive environmental impact, such as improving a business’s own energy efficiency.
- Working Capital Loans: To manage cash flow for contractors and suppliers involved in long-term infrastructure projects.
Partnering with a finance broker simplifies finding and applying for the right funding. They understand the specific needs of the energy and infrastructure sectors and can connect you with appropriate lenders. For further impartial advice, explore resources from the British Business Bank and guides like the ICAEW Business Finance Guide.
Conclusion
Ofgem’s approval of a multi-billion-pound investment in the UK’s energy networks marks a pivotal moment in the country’s transition to a more secure and sustainable energy future. While the investment necessitates a rise in household bills in the medium term, it is positioned as a crucial step to avoid higher long-term costs and volatility. The programme will create vast opportunities for businesses equipped to deliver on this national infrastructure challenge.
Is your business involved in the energy sector or looking to invest in green technology? Explore tailored finance solutions today and connect with our network of over 95 lenders to find the perfect fit for your needs.