The UK energy regulator Ofgem has proposed funding arrangements of up to GBP1 billion over the next two years for electricity transmission grid projects that are said to be vital in Britain's bid to combat climate change.
Ofgem said this initiative addresses the need for investment in transmission infrastructure to connect new wind farms and other renewable generation. The regulator has proposed arrangements that are pitched to ensure progress for the urgently needed projects, while protecting the consumer from unnecessary costs.
The proposed arrangements could amount to a 20% down payment on the investment needed over the next ten years if all projects meet planning and other criteria. Over 70% of that investment is earmarked for Scotland.
The remaining 80% of the ten-year investment programme will fall into a period of new regulatory controls which come into play when the current controls run out in 2012. Ofgem said that it will decide on arrangements for that investment once the new regime is in place. This is expected to avoid the risk of committing to arrangements that expose consumers to unnecessary costs.
Alistair Buchanan, chief executive of Ofgem, said: “Ofgem has put forward a plan that could inject up to GBP1 billion into national electricity grid investment. This is needed urgently to handle growth in wind power and other renewable generation that is arising from Britain’s drive to curb climate changing emissions.
“Our proposals provide a common-sense solution that meets urgent investment needs. And it holds off on decisions that could place an unwarranted burden on consumers through over generous allowances. Once the next review of the industry’s transmission revenue allowances is underway we will be able to look at the rest of this investment.”
Based on the current investment plans of the transmission companies, government targets for reducing carbon emissions by 2020 could require investment totalling about GBP5 billion over the next ten years. The recent proposals could deliver up to a fifth of that sum by 2012.
Meanwhile preparations are underway for the next period of regulatory controls (price controls) for the energy transmission companies. And a project analysing the regime governing all of Ofgem’s regulatory controls will conclude in 2010. This project – RPIX@20 – could change the way all networks, including transmission grids, are regulated in future, Ofgem said.