Terra Firma Energy – 10 July 2025

Ofgem has provisionally approved a £24.2 billion investment package to strengthen the UK’s gas and electricity networks, enhance energy security, and support the transition to cleaner, more resilient power infrastructure.

The regulator announced the funding on 1 July as the first step in a wider £80 billion upgrade programme set to run between 2026 and 2031 — the largest expansion of the UK’s electricity grid since the 1960s.

Key Highlights:

£15.3 billion is allocated to maintain and safely operate the UK’s gas transmission and distribution networks, ensuring stable supplies to homes and businesses.

£8.9 billion will go towards upgrading the high-voltage electricity grid, with a further £1.3 billion in additional funds available immediately to accelerate key projects.

The investment will enable over 80 new transmission projects, upgrading 4,400 km of existing overhead lines and adding 3,500 km of new circuits — including offshore infrastructure — to connect up to 126 GW of clean power by 2030.

These upgrades are vital to meet the growing demand for electricity as the UK moves away from fossil fuels. By expanding the grid’s capacity, the investment will help integrate more renewable energy sources, reduce reliance on expensive gas imports, and cut emissions — while also supporting long-term cost savings for consumers.

Impact on Bills:

Network charges are expected to increase by around £104 per year by 2031, including £30 for gas and £74 for electricity.

However, the grid investment is projected to reduce wider system costs — particularly constraint payments made to wind farms — saving up to £80 per household.

Net effect: bills could be £30 lower than they would be without this investment, with a total net impact of just £24 per year (under 40p per week) by 2031.

Value for Consumers:

Ofgem has applied rigorous cost controls, cutting over £8 billion from initial company proposals to ensure value for money. Delivery targets have been tightened, and the cost of equity for private investors has been provisionally set at 6%, balancing the need to attract capital with protecting consumers.

“This record investment will deliver a homegrown energy system that’s more secure, more stable, and better for Britain,” said Ofgem CEO Jonathan Brearley. “It’s a long-term insurance policy against volatile gas prices and rising bills.”

The regulator stressed that delaying investment would be more costly in the long run and reaffirmed its commitment to stepping in if companies fail to deliver on time and within budget.

The draft decision is now open for consultation, with final determinations expected by the end of 2025.