The National Infrastructure Commission (NIC) has called for further bill hikes and a shake-up of the way the UK’s electricity network is regulated to meet rapidly increasing demand for power.
Current regulation by Ofgem is “too complex” and discourages operators from making the “proactive investments” needed to improve the network’s capacity, the government’s independent adviser said in a new report.
Demand for electricity is set to double by 2050 but investment has lagged behind, fuelling delays in securing grid connections and slowing down the roll-out of renewable energy projects.
“The UK is heading in the right direction on decarbonising power, but we can’t be complacent,” Sir John Armitt, chair of the National Infrastructure Commission, said.
Armitt said a “new approach” to regulation was required, which encourages operators to make “prudent local investments” to anticipate future demand and mitigate climate impact.
The NIC’s recommendation means the average annual household electricity bill will rise anywhere between £5 to £25.
“Asking consumers to make a small contribution up front to enable this won’t be welcome,” Armitt admitted, but he argued there was a “big prize on offer: harnessing the benefits of cheap renewable generation sooner rather than later and building a secure network optimised to support economic growth and decarbonisation, with resilience baked in.”
The Commission’s year-long study concluded Ofgem’s price control process, a method to control the amount of cash made by operators, needed to be simplified beyond prioritising low costs for consumers in the short term.
The report also pushes the government to implement a series of changes to the planning system by 2025, to reduce uncertainty and speed up the approval of new infrastructure projects.
These include changing legal acts that free-up construction of overhead lines and substations, which transport electricity through the system.
A spokesperson for Ofgem said: “Ofgem welcomes the NIC’s report and we are encouraged that many of the recommendations chime with work already underway.
“We are committed to promoting growth and investment and enabling network operators to invest for the future. Last week we proposed radical reform to speed up grid connections and we are committed to introducing flexibility in the system that rewards customers for using energy during hours when demand is low.
“We will consider all aspects of this report and will continue to work in partnership with government, NESO and industry to build on the progress already made as we push forward to the next stage in the drive to net zero.”