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28 January 2013

UK to invest £24 billion to upgrade power grids and promote low carbon energy

The UK will be making a  £24 billion upgrade to its power grid with the ambition of connecting more of its low carbon energy sources to its network.

There is increasing stress on the grid system in the UK as renewable energy technologies grow in popularity. Technologies such as onshore and offshore wind farms are becoming more prevalent in the UK energy porfolio and the new investment will be looking to take this into account.

Environmental targets and legislation have also had an impact on the energy mix and the Large Combustion Plant Directive, for example, which deals with industrial emissions, means that oil and coal capacity is likely to be limited. Additionally, the UK is working toward its renewable energy targets; the country hopes to reduce greenhouse gas emissions by 80 per cent from 1990 levels by 2020.

The grid, therefore, will be required to become more flexible, with a careful balance between supply from the less predictable renewable energy sources and that of more reliable supplies such as nuclear power. This will require an upgrade in IT systems, and many of the UK’s electricity assets, which date from the 1950s and 60s, will have to be replaced.

Not only does the grid need to be upgraded, but the impact of this on consumers – including cost and appearance – will need to be considered.

Around £470 million will be made available for the undergrounding of new power lines. In relation to areas of outstanding natural beauty, Ofgem has introduced an initial funding allowance of up to £500 million available to companies.

Consumer reactions may not be entirely positive due to the price increases that will be necessary to fund all this. Consumers can expect to see an increase of around £12 in their energy bills in a country that is already hit by recession.

However, energy companies in the UK had initially campaigned for a higher amount of investment, requesting over £45 billion to improve the country’s energy networks, which would have increased the cost to the end user still further. While the energy industry had hoped for more money, the funding has been broadly welcomed within the sector.

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