Delays to upgrading power grid will cost consumers billions, NAO report warns
Failing to speed up improvements to Britain’s ageing power grid to cope with increased renewables could cost consumers billions of pounds by 2030, the official spending watchdog has warned.
Up to £70 billion investment is needed over the next five years to upgrade and maintain Great Britain’s transmission network, which was mostly built between the 1950s and 1970s around major fossil fuel power plants – and is now ageing and poorly matched to the boom in renewable electricity.
In a new report, the National Audit Office (NAO) said a typical household paid £44 towards building and maintaining the grid in 2025/2026, a cost that is expected to rise to £104 per household by March 2031.
But energy regulator Ofgem estimates billpayers will save £30 a year by then overall from the investment in the grid, compared to the wholesale costs of electricity and the “constraint” payments used to balance the network if upgrades are not accelerated to cope with renewables.
In 2025/2026, consumers paid £1.9 billion in these constraint payments, which are paid to generators to turn up or down their electricity to balance the grid.
Significant amounts of renewable electricity can enter the grid far from where it is used, such as from offshore wind farms, but cannot be sufficiently moved to where it is needed because of limits to grid capacity.
So wind producers have to be paid to switch off while gas plants, whose costs are linked to global gas prices, are paid to generate electricity elsewhere instead.
Currently “clean power”, renewables and nuclear, make up 73% of Great British electricity generation, and the Government has pledged to increase that to 95% by the end of 2030.
But renewable electricity generation has expanded faster than the grid under successive governments, increasing constraint costs and the NAO warns these costs could rise to £7.8 billion by 2031 if grid upgrades are not accelerated to match the clean power plan.
Upgrading the grid is also necessary for economic growth, to connect energy-intensive developments such as new housing and data centres, the report said.
But many of the 80 grid upgrades needed for the clean power plan are at risk of not being completed when they should have been, the NAO warned.
And there has been no significant acceleration in three schemes that required speeding up to meet the 2030 target, or a further eight projects which would be beneficial to limit constraint costs.
The report said most of the grid upgrades were chosen because they were already in development, and the Government has not demonstrated these projects represent the best way of achieving its objectives.
The National Energy System Operator (Neso), Ofgem and the Department for Energy Security and Net Zero (DESNZ) are working to speed up the delivery of grid upgrade projects, the report said.
But delivering all the upgrades by 2030 “will be very challenging”, with significant risks to planning, supply chain and system access risks, the NAO warned.
The watchdog is urging DESNZ, Neso and Ofgem to strengthen oversight of the upgrades, improve transparency over the cost and progress of each scheme and review options over what to do with new power generation projects that are due to connect to the grid before it is ready.
Gareth Davies, head of the NAO, said: “While DESNZ, Ofgem and Neso have started to improve the way they work together, the planned upgrades of the electricity grid will test systems not designed for activity at this pace or scale.
“Value for money now depends on delivery.
“Failure to implement these necessary grid upgrades will hamper economic growth as well as increase consumer bills.”
Responding to the report, Sir Geoffrey Clifton-Brown, chairman of the parliamentary Public Accounts Committee, said the grid had failed to keep pace with the shift to renewables and “is in dire need of upgrading to support the transition to clean energy”.
“Today’s NAO report highlights the scale of the challenge: up to £70 billion of investment is needed by 2031, requiring transmission owners to quadruple annual investment spending.
“As one our most important pieces of infrastructure, the grid must be capable of meeting rising demand, whether that is from new homes or data centres.
“Years of underinvestment already cost consumers almost £2 billion a year in payments to manage network constraints, which may rise to up to £8 billion by 2030.
“DESNZ, Ofgem and Neso must deliver critical projects on time and provide transparent reporting so Parliament and the public can hold them to account,” he said.
Energy minister Michael Shanks said: “This report is another stark reminder of the cost of years of historic underinvestment in the grid.
“As the National Audit Office recognises in its report, our once-in-a-generation reforms are finally building the infrastructure we need: reducing our dependence on the fossil fuels that leave households exposed to price spikes and helping lower people’s bills for good.”
A Neso spokesperson said: “Consumers benefit when generation, networks and future demand are planned together as part of a coordinated whole-system approach.
“We are doing everything within our control to keep balancing costs down while maintaining security of supply and will continue working with Government, Ofgem and network companies on the strategic planning needed to support delivery across the system.”
An Ofgem spokesperson said: “A stronger grid will connect more home-grown renewable power, reduce costly constraints on the system and help shield consumers from volatile international gas prices.
“That’s why we’ve introduced reforms to speed up critical infrastructure projects, unblock connection queues and strengthen incentives on network companies to deliver efficiently and on time.
“Protecting consumers and driving down costs remains our priority. Funding is released in stages, costs are rigorously scrutinised and companies face financial penalties if they fail to deliver.”
Published: by Radio NewsHub