Ofgem unlocks funding for major electricity grid upgrade while delivering over £60m of consumer savings

Ofgem has today (Monday 19 October) confirmed a funding package for a major electricity transmission upgrade that will help connect consumers to more homegrown clean power and boost energy security.

Ofgem has greenlit a £642.1 million funding package for National Grid Electricity Transmission's (NGET) Bramford to Twinstead project in East Anglia. The project will bolster the electricity transmission network between Suffolk and Essex which will include: 18km of new overhead line, 11km of underground cable, a new substation at Twinstead Green and upgrades to the existing Bramford substation. The work will enable more low carbon and renewable generation from the region to be connected to the grid and help meet future demand.

By providing additional network capacity, the project will also drive down the constraint costs which are incurred when wind generators are paid to stop generating, because there isn't enough grid capacity to accommodate all the energy they are generating. 

The project forms part of NGET's wider Great Grid Upgrade programme and has been fast-tracked under Ofgem's Accelerated Strategic Transmission Investment (ASTI) framework, which is speeding up the delivery of 26 strategically important electricity transmission projects while maintaining robust scrutiny of costs and consumer protections.

Ofgem has scrutinised proposed costs and cut £60.6 million from the allowance requested by NGET for the project, underlining Ofgem's role in supporting essential grid investment while protecting consumers from unnecessary costs.

 Beatrice Filkin, Ofgem's Director of Major Projects, said: Britain needs a bigger, stronger electricity grid to connect more homegrown clean power, strengthen energy security and reduce the bottlenecks that can add costs to the system. The cost of building this infrastructure now will be less than the longer-term cost of doing nothing.

But every penny invested must deliver value for consumers. We've assessed NGET's proposed project budget and cut £60.6 million from it, making sure this vital upgrade can go ahead whilst also protecting consumers from any unnecessary costs.

This decision supports the investment needed to modernise Great Britain's grid and to deliver cleaner power and value for money for the British consumer."

Ofgem will continue to scrutinise spending on the project through the relevant regulatory routes.

Any future allowances will remain subject to Ofgem's stringent assessment of whether the costs are necessary, efficient and properly evidenced.

ASTI forms a key part of the once-in-a-generation upgrade of Britain's electricity grid, helping transport more power to where it's needed.

This investment will strengthen energy security by making better use of Britain's renewable resources and reducing reliance on volatile international gas markets. Timely delivery will also reduce the cost of managing an overloaded grid. Ofgem's role is to enable the investment needed while holding network companies to account for delivery, cost and value for consumers.

Notes to editors

Bramford to Twinstead

As part of its Great Grid Upgrade, NGET is upgrading the electricity transmission network between Bramford substation in Suffolk and Twinstead Tee in Essex through the construction of 18 km new overhead lines and 11km of underground cable.

The existing electricity network in East Anglia needs upgrading in order to transport the new renewable and low carbon energy expected to connect to the network in this area by the end of the decade. NGET are reinforcing the network to meet future demand, boost energy security and help the nation become more self-sufficient.

To fund the project Ofgem has approved £642.1 million of costs against NGET's submitted request for £702.7 million, a reduction of £60.6 million.

The decision confirms Ofgem's earlier minded to decision in its  Project Assessment  in January this year.

For more on the decision see Bramford to Twinstead: Project Assessment | Ofgem

Cost to consumers

The cost of the project and forecast benefits were factored into the RIIO-3 investment package. This forecasts that the overall RIIO-3 arrangements could lead to £108 being added to bills by 2031. Within this £108 increase, around £60 is to pay for new electricity infrastructure, including the Bramford to Twinstead project.  The electricity transmission infrastructure investment factored into RIIO-3 will result in £60 of costs being added to bills by 2031 but will deliver estimated savings of £80 compared to not investing in the grid.  

The majority of the £108 relates to investment cases that we expect to receive through reopener mechanisms during the rest of the RIIO-3 period, which runs to March 2031.

ASTI

Delivering the Government's Clean Power ambitions requires a huge amount of new infrastructure. Ofgem's Accelerated Strategic Transmission Investment (ASTI) framework was specifically designed to fast track its assessment of 26 strategically important electricity transmission projects needed to enhance the electricity network. 

ASTI streamlines the onshore transmission regulatory approval process, accelerating project build schedules, whilst also ensuring robust consumer protection in a fast-track process to deliver the network infrastructure needed for clean power as soon as possible. 

This will also help achieve government decarbonisation goals and reduce Great Britain's exposure to volatile international gas prices. It will also help drive down the constraint costs which are incurred when wind generators are paid to stop generating, because there isn't enough grid capacity to accommodate all the clean homegrown energy they are generating. 

Funding of energy transmission projects 

Ofgem never sends money directly to TOs (Transmission Owners). 

TOs raise finance for electricity transmission projects by funding upfront capital investment through a mix of debt and equity, supported by Ofgem's RIIO price control framework. 

Under RIIO, investors receive regulated returns (based on an allowed cost of capital) and the efficient costs of the assets are recovered over time through allowed revenues ultimately paid via network charges on consumer bills. 

TOs are only allowed to cover costs Ofgem deems efficient, and these are recovered by TOs through their allowed revenues, which are covered through network charges, which form part of consumer bills.