UK Grid Strategy to Spark Investor Confidence

National Grid ESO proposes £58 billion investment by 2035, following in the footsteps of the EU’s €584 billion Action Plan. 

Recommendations aimed at boosting the flow of finance and connectivity to the UK’s power grid will also boost investor confidence in renewable energy projects, according to industry experts. 

The National Grid Electricity System Operator (ESO) earlier this week proposed a £58 billion (US$73.1 billion) investment in the UK’s electricity grid between 2030 and 2035. This would be on top of the approximately £54 billion of grid works already planned by 2030. 

“The ESO’s proposed investment is excellent news, especially for those investing in renewables like solar,” Alan Gorman, Investment Director at Blackfinch Energy, told ESG Investor. “By strengthening the grid, we can better manage the evolving supply and demand dynamics, making it easier for low-carbon projects to come online.”

The surge in applications for new grid connections in recent years has evidenced the need for acceleration, Gorman stressed.

“Streamlining grid connection is crucial for investor confidence,” he added. “It ensures a more predictable flow of viable projects, which is fundamental for those looking to contribute to energy security and the net zero goal.” 

Work in progress

In December, ESO flagged applications representing 573 gigawatts (GW) of power generation had applied for grid connections – far in excess of the current installed capacity of approximately 70GW.  

The proposed infrastructure projects in ESO’s plan could add up to £15 billion to the UK economy and support over 20,000 jobs each year, the group argues, with 90% of those benefits being outside London and the Southeast. 

Earlier this month, Blackfinch Energy’s Horsey Levels Solar Farm in Somerset – which can generate up to 27,550 megawatt hours of electricity – became the country’s first to benefit from the National Grid’s Technical Limits acceleration program. 

The programme aims to streamline the integration of renewable energy into the national grid and is one of nine ways the National Grid is working with industry to accelerate grid connections. 

“The current grid constraints pose significant challenges for investors and developers alike. The backlog of over 650GW projects awaiting connection is worrying, with estimates suggesting that a substantial portion may never come to fruition,” said Alex Brierley, Co-head of Octopus Energy Investments. “We’re particularly concerned about the impact this bottleneck is having on investment flow into the sector.” 

Reports of global infrastructure investors turning away from the UK due to grid constraints further underscore the urgent need for action, Brierley emphasised. “Collaboration and concerted action across the industry, regulators and policymakers. are paramount to overcoming these challenges and unlocking the full potential of renewable energy in the UK,” he added. 

European efforts 

Research from BloombergNEF released in January said grids were a critical enabler of the renewable energy transition, being the third-largest contributor globally with a total US$310 billion. As such, the organisation flagged that investment in them needed to rise in the coming years. 

This message was further pushed home by the International Energy Agency (IEA), which in October last year released a special report on electricity grids warning that a lack of ambition and attention could make power grids the “weak link” in clean energy transitions.  

According to the IEA, annual investment in grids has remained “broadly stagnant” and needs to double to more than US$600 billion a year by 2030. There is also a large and growing queue of renewables projects waiting for grid connection, with 1,500GW worth of those in advanced stages of development. 

Last November, the EU Commission launched an Action Plan for Grids – a 14-point plan to modernise Europe’s electricity grid and prepare for the renewables-based electrification of its energy system.

The EU’s current grid is unable to accommodate the renewables requiring connection, with electricity demand set to grow by 60% by the end of the decade. An estimated €584 billion (US$631.6 billion) of new investments are said to be necessary by 2030 to make the necessary upgrades. 

As part of the plan, the European Investment Bank will also identify financing tools to support grid investment. 

The IEA has previously said that US$4 trillion of yearly investments in renewable energy globally would be needed by 2030 to achieve net zero by 2050 – at least US$1 trillion of which should go to emerging markets and developing economies. 

Group of 20 countries, which include the UK and several EU member states, currently account for nearly 90% of global renewable power capacity. 

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