Ofgem Says Households Could Face a £60 Bill to Rewire Britain

According to reports, Ofgem says about £32 billion is needed to update energy networks to hit renewable targets. However, it did go on to warn that the final cost would be even higher than that.

Ofgem said that rewiring Britain’s energy networks to hit the country’s renewable targets will cost every household in the country about £60 over the next decade Companies need to invest about £32 billion by 2020 to plug thousands of wind farms into the grid as well. Money is also needed to build smart grids, which move electricity and gas around new local networks to meet flexible demand.

The chief executive of Ofgem, Alistair Buchanan, admitted that the £6 a year extra on consumer bills did not cover the £8 billion it will cost to build huge new offshore grids for wind farms out to sea. To hit the targets, the rate of investment in the energy network over the next decade must double.

By 2020, £200 billion needs to be spent on new energy infrastructures like wind farms, nuclear power stations and gas plants. Energy bills will rise even more if Ofgem’s calculations about the cost of investments falling over time are inaccurate. In its worse case scenario, in the event of an energy supply crunch, it estimates bills will rise by 60 percent by 2016. The average annual electricity and gas bill today is just about £1,200.

Ofgem did say that the new regulatory regime would provide companies with the incentives to make the necessary investment in the network. Ever since the industry was privatized back in the ’80s, companies have succeed in driving down costs. However, they have not made the necessary investment to replace the UK’s aging infrastructure.