Ofgem recently unveiled their £25 billion green investment plan, set to roll out over the next five years, in a bid to prepare Britain’s energy infrastructure for a low-carbon future.
However, many energy companies have suggested this could in fact be putting the country’s climate goals at risk. Given the divided opinion, we analyse whether these plans are helpful or harmful in the desire for a net zero in 2050.
The plan that Ofgem has outlined is aimed at offering a fairer deal for the consumer by reducing investor returns. This is currently expected to be reduced to 3.95%, from the current 7% to 8% – meaning that consumers will pay less for their energy bills. As a result, more of what is paid will go towards improving existing infrastructure and offering further upgrades to Britain’s renewable energy grid. Furthermore, there is an overriding goal of improving the electric vehicle charging and grid infrastructure – thus ensuring a positive outlook for renewable energy as a whole.
Energy companies have suggested this may have the opposite effect however, as a few concerns had been raised. The first suggests that by lowering the returns share for investors, it could slow the pace for Britain’s energy transition, as it may make the market less attractive to investors who are likely to receive less.
The second concern raised is over Ofgem’s decision to cut total investment allowed in new electricity grid projects, as this could also slow the goal to reach net zero. The estimated £5.9bn to £9.1bn falls below the proposed £10.8bn that may be needed to reach energy demands from increasing numbers of electric cars, hobs, and heat pumps on the network.
It has been suggested that these savings are short term, as they aim to reduce consumer energy bills by £20 per household in 2021, with the long term expectation being it may reduce bills by £100 a year in the future.
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