Report calls for £50bn investment boost in UK electricity grid
A report has called for a “step change” in investment in local electricity grid distribution networks in the UK.
The report from the National Infrastructure Commission says that with demand for electricity set to double by 2050, the current pace of additional investment in the country’s electricity distribution networks is far too slow.
A year long study says a more proactive approach to planning the distribution network, including sorting out UK smart meters and making heat pumps smart.
However, current regulation by Ofgem is too complex and doesn’t encourage distribution network operators (DNOs) to make the proactive investments needed to boost network capacity and provide resilience.
The UK’s National Grid last year announced a £60bn plan to upgrade networks in the UK and US over the next five years. At the same time the UK government is spending £1.1bn to cut the delays in making connections to the grid from five years to six months.
The distribution network Is significant, with over 838,000 km of wires, more than 230,000 substations and 348,000 pole mounted transformers.
The report. Electricity distribution networks: Creating capacity for the future, warns that failing to improve the process of connecting to electricity distribution networks will also constrain economic growth. “We must learn the lessons of the UK’s transmission infrastructure, where a failure to invest ahead of demand means we’re now playing catchup,” says Sir John Armitt, chair of the National Infrastructure Commission.
“The risk is that if we don’t have a plan in place before demand shifts up a gear, we end up with an overloaded and under-capacity system lacking resilience.”
This will require £37bn to £50bn of investment in the distribution network could be needed to support additional demand and generation between today and 2050. This represents at least a doubling of current annual allowances for load related expenditure, on top of end of life asset replacements.
This will also require more support for the supply chains, by considering how new mechanisms for managing the electricity transmission supply chain could also be applied to the distribution network.
It recommends updating the smart meter rollout plan by the end of 2025, including measures to fix smart meters not currently operating in smart mode, and implementing the smart appliance mandate for heat pumps in 2026.
“The days of our electricity coming from a few fossil fuel plants are over. A third of our generation already connects directly to the local network and more will follow over coming decades, and we also expect the future of heating and transport to be mainly electric,” said Nick Winser, National Infrastructure Commissioner.
“We need an electricity distribution system that’s flexible and smart enough to optimise the benefits of this bigger and more complex network and drive down costs for consumers as quickly as possible.
Distribution networks are how all homes and most businesses receive electricity and are a vital component for successfully decarbonising the economy.
“We need a concrete plan to ensure they are fit for the future. They must be flexible to cope with the greater demands we will place on them – not least the new sources of generation which will plug straight in, and the power-hungry data centres integral to our future, data-driven economy,” it said.
“They need to be smart and ready to handle the varied sources of generation and storage – such as stored electric vehicle battery power – which will be increasingly important features of our electricity system. And they must be resilient, able to cope with not just increased demand but more extreme hot and cold spells and higher average temperatures.”
“Every part of our electricity sector must play its part in supporting economic growth, and distribution networks are no exception. But that requires a more strategic approach that empowers proactive investment,” said Winser.
The National Infrastructure Commission’s analysis for the second National Infrastructure Assessment projected demand for electricity would increase by around 50 per cent by 2035 and double by 2050.
This comes as electricity demand on the distribution network has been static or declining for many years – domestic electricity consumption in the UK fell by 26 per cent from its peak in 2005 to 2023. However, the transition to net zero will make the energy system increasingly dependent on electricity, with demand for electricity expected to increase by around 50 per cent by 2035 and to double by 2050.
There is also a lot of capacity coming online that needs connecting to the grid. The National Energy System Operator estimates that the volume of distribution-connected generation will increase from around 30 GW to between 80 and 140 GW in 2050. Thi sis more than enough to meet the UK’s net-zero aims,
All households, and the vast majority of businesses, connect to the distribution network. Around a third of generation is connected to the distribution network – a proportion which is growing as more solar and onshore wind is deployed. Distribution networks will also need to be able to export some power to other parts of the country via the transmission network.
The report also encourages government to urgently review the skills gap and take action to attract and retain the workforce needed to complete the energy transition.
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