Energy regulator gives go-ahead for billions to be spent upgrading grid in Scotland

Scottish Power, which runs the network in central and southern Scotland, will invest an initial £2bn of a larger £12bn package, while while SSE is to spend £3.4bn.

In its final verdict on price controls for energy network firms over the next five years, Ofgem yesterday increased the allowed investment spend from the initial £24 billion that was provisionally given the go ahead in the summer. Its decision will push up household bills by more than first expected, before savings.

But the regulator insisted that bills would be even higher without the approved investment, while the funding will allow the UK to make savings through boosting the nation’s power generation and lowering reliance on imported gas.

ScottishPower said its overall £12bn package was a record investment in a major rewiring programme, that will “unlock capacity and economic growth, as well as reducing electricity bills and network constraints”.

Its SP Energy Networks business will now begin work to build 12 new major substations, upgrade 450km of existing circuits, reconduct 87km of overhead lines and replace 35km of underground cable between 2026 and 2031.

The investment also includes two new subsea electrical superhighways off the east coast of Scotland. The multi-billion-pound Eastern Green Link 1 and Eastern Green Link 4 subsea high voltage lines will have a joint capacity of 4GW and have the combined subsea cable length of 706km.

SP Energy Networks plans to double its workforce by recruiting 1,400 new roles directly and supporting a further 11,000 jobs across the country.

Nicola Connelly, CEO of SP Energy Networks, said: “We welcome Ofgem’s final determination recognising the need for this historic investment in critical network infrastructure.

“Our record investment of almost £12bn will unlock capacity in the grid and bring economic growth across our area of central and southern Scotland and beyond. Whilst also bringing costs down for consumers by reducing network constraints.

“We are committed to ensuring consumers and network users get a fair deal. Making this crucial investment now will drive a positive impact on stabilising and lowering consumer energy bills in the longer term. And it will achieve the UK’s ambition to be a clean energy superpower, enhancing the security and resilience of our energy supplies.

“We will continue to engage with Ofgem to ensure a regulatory framework that incentivises the largest ever investment in the electricity grid and helps move the UK towards its climate targets.”

Households will see the network charges on bills – which make up around a fifth of average annual energy costs – surge by £108 to £330 by 2031 to cover the cost of the extra investment, up from the £104 rise estimated in its draft verdict in July.

The regulator said this will include £48 for gas networks and £60 for the electricity grid. It comes after the latest energy price cap change was announced, which will see energy bills rise unexpectedly by 0.2 per cent from January after increases to Government policy costs offset falling wholesale gas prices.

The regulator said that with savings of around £80 taken into account, the net increase to bills is expected to be around £30, or £3 a month, with costs expected to fall in future years as more renewable electricity generation will lower wholesale power costs.

Jonathan Brearley, chief executive of Ofgem, said: “The investment will support the transition to new forms of energy and support new industrial customers to help drive economic growth and insulate us from volatile gas prices.

“But this is not investment at any price.

“Every pound must deliver value for consumers.

“Ofgem will hold network companies accountable for delivering on time and on budget, and we make no apologies for the efficiency challenge we’re setting as the industry scales up investment.”

The Department for Energy Security and Net Zero (DESNZ) said spending to improve energy networks was “essential” and stressed the Government was offering support with costs by cutting £150 off power bills next April.

Chancellor Rachel Reeves announced in last week’s Budget she would do this by scrapping the Energy Company Obligation scheme introduced by the Tories in government.

A DESNZ spokesperson said: “Upgrading our gas and electricity networks after years of underinvestment is essential to keep the lights on and ensure energy security for our country.”

Ofgem has been reviewing the plans put forward by energy network companies – electricity transmission owners, National Gas and gas distribution companies – since the start of the year and has made reductions of more than £4.5 billion compared with the initial £33 billion plans submitted.

But it increased the amount that was first proposed in July following push-back from network firms, who said more was needed to account for extra electricity transmission development and infrastructure health, among other reasons.

Ofgem said the 80 new power projects the investment will help fund include boosting the grid’s capacity through new power lines, substations and other technologies, to handle the flow of electricity from new renewable sources.

Scottish and Southern Electricity Networks, which is owned by SSE, said: “The investment it delivers will help reduce reliance on imported energy from overseas, remove grid bottlenecks and strengthen energy security, as well as acting as a major catalyst for economic growth, jobs and supply chain investments across the UK to unlock the country’s full potential.”

National Grid, which runs much of Britain’s electricity grid, said it welcomed Ofgem’s “recognition of the need for significant investment into the electricity transmission sector” and would review whether the package approved “delivers an overall framework that is both investable and workable”.

Greenpeace said upgrades to the network were “vital” but called on Ofgem to make sure they delivered “genuine value for money”, while the End Fuel Poverty Coalition said “these vast sums of essentially public money must come with proper scrutiny and guarantees for consumers”.