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(Bloomberg) — The UK’s energy regulator said distribution grids must use flexibility tools such as smart technology to better control demand before being allowed to make network investments that add to customers’ bills.
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Utilities will need to utilize tools such as smart electrical-vehicle charging and battery storage and prove the need for physical grid upgrades, Ofgem said in a report that sets out rules for 2028-33 grid investment. The framework allows for a 6.08% cost of equity for investments, higher than in the previous period.
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Britain is facing mounting pressure on its electricity networks as renewable energy projects, EV charging infrastructure and data centers compete for grid access. Years-long connection queues have become a major bottleneck for electrification plans, while the cost of expanding networks has raised concerns about it being passed onto household bills.
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The regulator warned against “speculative or premature” spending amid uncertainty over future demand, outlining a tougher approach to investment approvals. The five-year period is a critical stage for grid investment needed to expand the existing 800,000 kilometers (500,000 miles) of networks connecting some 30 million customers, Ofgem said.
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“We know electrification across the economy will drive unprecedented demand, but its precise pace, scale and location remain uncertain,” Steve McMahon, Ofgem’s director of network price controls, said in a statement. “We will sign-off new investment only where the strategic need is clear and networks have maximized existing grid capacity to control demand using smart, flexible grid technology.”
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