Energy Bills to Rise by £116 Pounds a Year to Fund Grid Upgrades and Network Investments by 2030

Households across Britain can expect to see energy bills rise by £116 annually by 2030 to cover a substantial £90 billion investment intended to expand the national electricity grid and maintain existing gas pipelines. Ofgem, the UK’s energy regulator, confirmed the plans this week, approving an initial £28 billion for the next five years, with additional funding expected for further infrastructure expansion.

This move will directly impact consumer bills. Levies on energy bills that are currently set at £222 per year will rise by £40 in April and continue to increase over the coming years, reaching an estimated £338 annually by 2030. Ofgem’s official impact assessment indicates these increases are necessary to support both transmission upgrades and the connection of new wind energy projects, which are crucial to the decarbonisation agenda.

According to Ofgem, the investment will help prevent soaring “constraint” charges, the costs associated with paying wind farms to shut down when the grid cannot absorb their output. Without this intervention, these charges could have added an additional £55 per household each year. Even with the planned upgrades, constraint costs are predicted to rise by roughly £10 per household annually by the end of the decade.

The regulator notes that the result will be lower wholesale power prices, leading to an overall saving of £80 per household compared to a scenario where the network was not expanded. Ofgem asserts the net impact on bills will be £30 in favour of investment, demonstrating long-term value despite the upfront cost to consumers.

Nonetheless, concerns remain regarding the scale of bill increases and the profitability of network companies. The return allowed on regulated investments has increased from 4.55 per cent to a range between 5.7 and 6.12 per cent, ostensibly reflecting higher market rates. Highlighting the issue, critics point to £4 billion in windfall profits made by network companies during the last regulatory cycle and question whether the new deal is overly generous.

The initial funding includes nearly £18 billion dedicated to maintaining Britain’s gas networks, with an additional £10 billion allocated for electricity transmission. Upcoming large-scale investments focus on new cables and pylons to reinforce the grid, much of which is driven by the integration of renewable energy. Ofgem’s accelerated repayment structure for gas distribution companies, prompted by uncertainty over future gas demand, will add an estimated £10 to bills by 2030 as the sector prepares for a long-term shift towards green energy solutions.

While these plans address immediate infrastructure needs and support the long-term aim of achieving net zero by 2050, the government faces continued pressure to alleviate costs for those struggling with energy bills. The Chancellor’s recent budget included short-term relief by temporarily removing £150 of other levies, but charities and consumer advocates maintain that further measures must be considered to protect vulnerable households from rising living costs.