Isra-Mart srl : Ofgem predicts £32bn needed to rewire low-carbon Britain

www.isra-mart.com

Isra-Mart srl news:

Businesses will face an increase in energy bills of at least six per cent over the next decade after Ofgem announced a new network regulation system designed the raise the £32bn of investment the watchdog believes is necessary to rewire the UK to support a low-carbon economy.

The energy regulator today confirmed the launch of the new Revenue= Incentives+ Innovation+ Outputs (RIIO) framework, which is designed to stimulate the investment needed to connect new wind farms and nuclear power stations to the grid, roll out smart grid technologies, replace aging networks and support anticipated increases in demand from electric vehicles and heating systems.

RIIO will replace the Retail Price Index model, which for the last two decades has provided the framework by which energy firms set network prices.

Ofgem said the new regime had been designed to boost innovation in grid technology and place a stronger emphasis on how successfully networks deliver energy to customers.

Key features include the setting of longer eight-year price controls, the introduction of incentives for network operators based on results, and an expansion of the £500m Low Carbon Network Fund to help support the roll out of smart grids.

Ofgem chief executive Alistair Buchanan said the RIIO could cut the cost of investment to customers by £1bn compared with the previous model.

"The RIIO model will ensure that efficiency and innovation are hard-wired into the network companies," he said in a statement. "This means the benefits of the green economy, like more skilled jobs delivering smarter networks to allow householders to run solar energy and other types of microgeneration, will be delivered."

But this morning he confirmed people would see their energy bills rise six per cent over the next 10 years.

He told BBC Radio 4's Today programme: "Our estimate at the moment is about a six per cent increase on the current average family's total [annual electricity and gas] bill [over the next decade]."

The reforms were welcomed by the Institution of Civil Engineers (ICE), which said it was encouraged by the government's commitment to invest in the energy sector.

"The regulatory framework must reflect today’s environmental and societal challenges if we are to have a fit for purpose energy network in the future," said ICE director general Tom Foulkes.