Sector: Utilities

In exciting news for the utilities sector, Ofgem has unveiled funding proposals that mark a significant step towards facilitating the government’s 2020 carbon emission reductions target.

Ofgem, the energy sector regulator, has published final proposals for £319 million worth of funding to help three transmission companies – National Grid Electricity Transmission, Scottish Power Transmission and Scottish Hydro-Electric Transmission – overcome delays to critical investments and help connect Britain’s burgeoning amount of renewable electricity generation.

The industry body’s Transmission Access Review sets out its plans for construction funding for a range of reinforcement projects due to begin before the end of the current transmission price control. Those aforementioned firms are subject to controls on their revenue, which are reviewed every five years and are designed to limit investment so that the sky-high costs are not passed on to customers.

The UK’s three electricity transmission giants, including National Grid, expect to invest £5 billion in transmission projects over the next ten years, but Ofgem was worried they could delay investments required to connect wind farms and other clean energy projects until current controls on their spending run out in 2012. With this in mind, the regulatory watchdog is prepared to allow up to an extra £1 billion to be spent on new projects over the next two years and will approve another £764 million if the grid companies support the investment cases.

Encouragingly, the proposed £319 million funding boost would amount to the first tranche of projects to benefit from a potential £1 billion package of extra investment in the UK’s high-voltage networks. And what’s more, the entire £1 billion package represents 20 per cent of the transmission firms’ overall ten-year investment plan to upgrade the energy network.