Regen has worked with the MCS Foundation on a paper looking at what's needed to ensure the distribution network is ready for net zero. It warns that the UK should learn the lessons from failing to invest earlier in the transmission network and ensure local grid upgrades are made a critical infrastructure priority over the next 25 years.
The electricity network is critical to decarbonising our homes –domestic heat pumps, electric vehicle chargers and rooftop solar panels all require a connection to the grid. There has been extensive focus by policymakers on upgrading the transmission network, but less thought put into investing in local distribution networks. Currently there is significant spare capacity on these, even at peak demand. However, with the increased uptake needed to meet net zero, our new report shows that almost half of all primary substations will be experiencing capacity constraints by 2035.
Electrification: The local grid challenge, created in partnership with the MCS Foundation, argues that local grid upgrades should become one of the UK's critical infrastructure programmes over the next 25 years, with the bulk of the work delivered by 2040.
The National Infrastructure Commission's Second National Infrastructure Assessment states that around eight million buildings in England (around 30% of the building stock) will need to switch from fossil fuel boilers to heat pumps (or other electric heaters) by 2035. However, our modelling shows that, without a programme of investment, almost half of all primary substations will be experiencing capacity constraints by then.
Upgrading the local distribution network
Unless Distribution Network Operators (DNOs) invest significantly to upgrade the electricity wires and substations that make up the distribution network in the next decade, the transition to net zero could stall and economic growth could be curtailed. As this map shows, constraints are expected to be widespread, with some regional variation in the timing of required upgrades.
However, the report stresses that upgrades are possible, and that investing early will bring benefits for net zero and for the economy. It recommends that Ofgem reforms price controls to require distribution networks to deliver long-term programmes of network upgrades in line with the demand forecasts set out in the forthcoming Regional Energy Strategic Plans. It also recommends improving grid flexibility, for example through smart homes, using electric cars and batteries to store electricity, and incentivising consumers to use electricity outside of peak times.
Government analysis in 2022 found that, despite more investment in the grid needed for net zero, network charges per unit of energy are expected to stay within the 4-6p per kWh range and could even fall in the long term. This is because the grid will be delivering much more energy in the future – potentially as much as 800TWh a year in 2050, up from 275TWh today.
Upgrading the grid must be an absolute priority for regulators and government, and that includes primary substations and the low-voltage distribution network, not just connections for power generation.
Investment in the grid will need to be ramped up in the next decade to ensure that all local areas can get the connections and development they need. If this is not achieved, targets to install 600,000 heat pumps a year and sell millions of electric vehicles will be at risk.
David Cowdrey, director of exeternal affairs at the MCS Foundation
Today, we have significant spare capacity on the local electricity network. However, we need to learn the lesson from the problems caused by the failure to invest in the transmission network. Regen is calling for reform of the way distribution network operators are regulated by Ofgem to put in place a long-term investment plan to be ready for the electrification of transport and heat.
Merlin Hyman, chief executive at Regen
Key takeaways
The report makes a series of recommendations for policymakers, Ofgem and distribution network operators to address the local grid challenge:
1
The government should make upgrading the local grid in time for net zero one of the UK's critical infrastructure programmes of the next twenty-five years to 2050
2
Ofgem should reform the price control process to require DNOs to plan and deliver a long-term programme of investment that will ensure the distribution network is ready for demand forecasts set in the upcoming Regional Strategic Energy Plans
3
The government and Ofgem should ensure local and national arrangements for flexibility are coordinated to optimise the system as a whole
4
DNOs should use the mechanisms in their budgets for 2023-2028 to scale up local network upgrades and produce and publish data on capacity and constraints on their secondary networks as a key priority.