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Britain's OFGEM Hikes Investment in Electricity Networks

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Julian Jackson is a writer whose interests encompass business and technology, cryptocurrencies, energy and the environment, as well as photography and film. His portfolio is here:...

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The UK has serious problems with an ageing electricity grid, BREXIT, and the need to integrate more renewable power and Electric Vehicles (EVs) into the system. Britain's regulator OFGEM (Office of Gas and Electricity Markets) has unveiled ambitious plans to cut emissions and unlock more flexible local distribution grids.

The financial arrangements will boost investment and according to OFGEM, bring record levels of green investment to consumers at the lowest cost. This stimulus package will be applied to the next round of prices controls for local electricity networks (DNOs) starting in April 2023.

The investment in local electricity grids is needed to help support the surge in electric cars on the road, small scale renewables, energy storage and cleaner forms of heating, such as heat pumps. Surface transport and domestic heating account for 34% of the UK's greenhouse gas emissions. It will also enhance the role of DNOs to create more flexible local grids that can balance demand and supply for electricity more effectively by connecting more small scale renewables and storage. Load management will be essential to ensure that increasing demand does not overwhelm capacity while adding clean power and storage to grid systems.

Jonathan Brearley, OFGEM's chief executive, said, "Our price control for local electricity networks paves the way for turning Britain's streets green, unlocking the investment needed to support the UK, Scottish and Welsh Government climate change targets, particularly around the electrification of transport.”

In line with the UK governments target of delivering net zero emissions OFGEM has set the rates of baseline return on equity at 4.4% CPIH, which is consistent with current market levels – on a level with the norm for EU regulators. This is to ensure Britain's utility sector remains an attractive prospect for investors.

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