Electricity transmission infrastructure: what has changed | Ofgem

The government’s goal is to create a flexible, clean energy system by 2030. In order to achieve this goal, the construction and modernization of the electricity transmission network is crucial.

According to the National Energy System Operator (NESO), grid expansion needs to happen more than four times faster than in the last decade. This means investing twice as much in half the time.

In this blog we explore:

• what the power system is and who runs it
• Developing solutions to meet future infrastructure needs
• our role in regulating the financing of transmission projects

How the electricity system works

There are three stages to provide electricity to people.

Electricity generation

Electricity is generated by a mix of traditional fuel energy such as coal and natural gas and renewable energy such as wind, solar or nuclear energy in power plants.

Electricity transmission

Overhead power lines attached to poles (metal poles) transport large amounts of high-voltage electricity quickly over long distances.

Power distribution

Electricity is taken from the transmission network and converted into safer values ​​(low voltage). Distribution network operators distribute these to local areas and communities so that they can reach homes, businesses and buildings.

Who is involved in electricity transmission?

NESO manages the flow of electricity from generation to transmission. It is responsible for planning and coordinating the design of power grids. This includes ensuring there is enough supply to meet consumer demand.

In Great Britain (England, Scotland and Wales) there are three companies that manage electricity networks. These are:

Transmission owners provide electricity supply and pass it on to distribution system operators. They also carry out the work to connect major customers and producers to the electricity grid.

Design of power grids

NESO is responsible for designing an energy system that meets future electricity infrastructure requirements. Transmission owners create proposed solutions to meet these needs. This may include the renovation, modernization or construction of new essential infrastructure or the acceleration of grid connections.

For each project, transmission owners are expected to:

• Advances in the detailed design of the physical components used in the infrastructure, such as the poles that support overhead power lines
• Contact the affected local communities before submitting an application to the relevant planning authorities and obtaining a building permit
• Collaborate with relevant stakeholders as part of project development

Our role in financing and approving projects

We regulate the companies that design, build, operate and maintain electricity transmission infrastructure. We do not design new transmission projects, plan how they should be built, or decide which routes they should take. This is the responsibility of the transmission owner and relevant planning authorities.

Transmission owners are funded directly from energy bills paid by consumers. It is important that we ensure that the cost of network upgrades represents good value for money for consumers. We do this through our network pricing controls, known as RIIO (Revenue = Incentives + Innovation + Results).

Under RIIO, we approve costs and financing for electricity transmission projects. When making the assessment we take into account:

• financial costs of the project and whether they are efficient
• Benefits of the project for consumers
• detailed design decisions
• further options and alternatives to the proposed solution

Our rigorous process requires transmission owners to evaluate a range of possible designs that provide value to consumers. Larger projects applying for funding under our Large Onshore Transmission Investments (LOTI) framework must justify the design of the project.

Minimizing impacts on consumers, local communities and the environment

Building new or upgrading infrastructure could potentially impact how much consumers pay on their energy bills. It is important that the correct funding amount is approved for the projects.

We can limit the impact while ensuring consumers benefit from a secure supply of clean and affordable electricity.

However, transmission owners should consider stakeholders’ views when planning and designing their projects. It is their responsibility to involve consumers and local communities in their plans for new infrastructure. They may also need to carry out specific assessments such as local environmental impact assessments and environmental surveys before they can receive approval from planning authorities.

Accelerating power transmission projects

Our Accelerated Strategic Transmission Investment (ASTI) framework plays an important role in delivering clean energy by 2030.

We developed the framework in 2022 to expedite our approval process for high-priority transmission upgrades that needed to be expedited. There are currently 26 projects using the framework to shorten the construction time of transmission infrastructure.

Advantages of the framework

The ASTI framework provides for phased funding and approval as well as a financial incentive for transmission owners to ensure required upgrades are delivered on time. By 2030, it will help connect up to 50 gigawatts (GW) of offshore wind energy.

We expect to continue to evaluate traditional large-scale projects through our LOTI process.

Further reading

For more information on the ASTI framework, see our decision to accelerate investments in onshore electricity transmission.

We also recently published our decision on the Centralized Strategic Network Plan 2 financing and permitting framework for onshore transition projects. This is primarily about the next phase of infrastructure investments, which will take place after 2030.