Expensive grid investments key to powering the UK economy

This was just one of five subsea cable projects announced on the same day by Ofgem and comes just a few months after Ofgem fast-tracked approval of the UK’s largest subsea connector. The Eastern Green Link 2 (EGL2) will provide a link from Peterhead to East Yorkshire, a distance of nearly 500 kilometres with a capacity of up to two million homes' worth of energy.

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If those sound like a lot of work and likely a lot of money, your instincts would be correct. EGL2 is a £4.3 billion project alone, and it’s worth noting that for the five new connectors announced last week, the regulator initially refused approval because they are set to add between £2 and £5 a year to energy bills from 2030 to 2035.

Against the need to hold closely to the aim of affordable bills for homes and competitive energy costs for business, such increases underline that these investments may not be without controversy, potentially generating debate about environmental impacts and the feasibility for the engineering challenges involved.

However, they are essential if we are to deliver the net zero UK power grid at the heart of Government policy, along with the longer-term ambition of being a net exporter of renewable power.

To understand why such technically difficult and expensive projects are essential, and their acceleration critical, it’s worth considering the history of the UK’s transmission grid, and why that needs to change to match our energy future.

Much of our current grid design came from a period of intensive investment in the 1950s and 1960s when the majority of energy in that time – 90% in 1960 – was provided by coal.

That's the reason why we had such large-capacity base load generating stations situated in areas with direct access to the local production of coal, for example Drax power station in Yorkshire and Longannet in Fife. With the addition of a highly efficient “Supergrid”, instead of transporting coal to the southern UK, huge power stations could be built right next to the coal fields and the electricity transported by transmission wires.

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The grid was adapted as the mix of energy changed, but particularly with the addition of nuclear generation, the model of very large capacity generating stations continued to shape the design of our electricity network. 

The model of generation near the source, with transmission to the area of demand, is nothing new. But our future plans for increased supply for renewables puts that model on steroids, with generation generally being about as remote from population density as you could possibly get, and that step-change drives the need for fundamental change – and big investment to achieve it.

In many ways, the period we are in now can be seen as comparable to the changing mix and adaptation in the 50’s and 60’s that drove investment in a transmission model that has served us well. This time the change has been equally rapid – just twenty years ago the UK’s energy from renewables was less than 1%, rising to 43% in the twelve months to September 2024, and forecast to continue rising as the UK aims to rapidly reduce its reliance on fossil fuel generation.

Subsea interconnector cables are just one part of the changes that are required to ensure our grid is fit for purpose amid the rapid shift to renewable energy reliance.

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Close to home, Scottish and Southern Energy Networks (SSEN) announced last year its Pathway to 2030 programme, a £10bn investment strategy across the north of Scotland which will help deliver both the UK and Scottish Government’s 2030 offshore wind targets. Next to that, Scottish Power Energy Networks (SPEN) has its own UK-wide investment plan, estimated in the middle of this year to cost £12bn between 2024 and 2028. The value of both these programmes is only likely to grow.

Looking at this outline task of work, the opportunity for this investment to flow to wider economic benefit is clear. The multitude of subsea cable projects matches the investment and effort that the Sumitomo and XLCC projects in the Ports of Nigg and Hunterston are undertaking, but cables are only one part of the equipment and infrastructure that this massive body of work will require. 

With that in mind, I return to my familiar soapbox in that funding – whether public or private – will ultimately be paid by us through taxes or network charges. It's therefore fair to expect a clear focus on maximising the regional or place-based economic benefits that come from that spending.

In simple terms, the wider supply chain opportunity from energy transmission investment must also be an opportunity to ensure that those funds flow to Scottish and UK businesses, both large but especially small.