Recommendation 16

HM Government Acknowledged

Regulation of the transmission and distribution network is a matter for Ofgem as the independent regulator. Government is working with Ofgem to help ensure that network companies play a full role in meeting our net zero objectives and supports Ofgem’s work to enable a regulatory environment where network companies can invest ahead of need, where the need is sufficiently certain to justify this. The new RIIO-T2 transmission price control will provide £30 billion worth of investment across Great Britain with the potential for a further £10 billion through uncertainty mechanisms over the next five years. Within the existing electricity distribution price control framework, £1.3 billion has been earmarked for expenditure by Western Power Distribution on networks in South and Mid Wales from 2015 to 2023. £765 million has been spent from 2015 to 2020, while targets on network resilience and reliability have been met. Over the same period, Scottish Power was granted a £2 billion allowance to cover the North Wales and Merseyside distribution network area. £1.4 billion has been spent so far up to 2020. This investment will allow Distribution Network Operators (DNOs) to ready their networks for the changes necessary to accommodate new renewable generation, as well as new low-carbon technologies such as electric vehicle charging and heat pumps. DNOs like Western Power Distribution and Scottish Power are currently preparing business plans for approval by Ofgem to cover the investments needed in their areas over the next price control period 2023–28. Ofgem is taking active measures in this next period to encourage the investment that will be required to support net zero. This includes providing clearer guidance on when and how companies should undertake anticipatory investment where there is significant uncertainty, and through the introduction of new mechanisms to ensure the price control can adapt to changing requirements. The Offshore Transmission Network Review (OTNR) seeks to ensure that future connections for offshore wind are delivered in the most appropriate way through increasing coordination and finding the appropriate balance between environment, social and economic costs. To support the delivery of the 2030 target and net zero by 2050 the review is developing a new plan-led approach that seeks to bring together onshore and offshore network planning in a more holistic way and facilitate more anticipatory investment in the required grid infrastructure. OTNR has brought together all the key stakeholders involved in the timing, siting, design and delivery of offshore wind, to consider all aspects of the existing regime and how it influences the design and delivery of transmission infrastructure. This includes the Devolved Administration of Wales.