Ofgem proposes £5-8 billion fund to accelerate UK energy transmission projects
Ofgem has launched a consultation on a proposed Advanced Procurement Mechanism (APM) that aims to invest between £5 billion and £8 billion to help Britain’s energy transmission owners reduce delays, control costs, and attract global investment in the transition to net zero. The consultation runs until December 18, 2024.
The APM will allow transmission owners to procure essential equipment such as switchgear, cables, and steel years in advance, often before project finalization. This approach aims to streamline project delivery, ensuring construction can begin immediately after planning approval with necessary materials already in place.
Key benefits of the APM include mitigating supply chain risks amid rising global demand, controlling construction costs by purchasing materials early, and supporting domestic manufacturing. Accelerated project delivery will contribute to achieving the UK government’s 2030 clean power target and subsequent net-zero goals.
To maintain accountability, Ofgem will impose strict governance to ensure funds are used as intended, with any unspent allowances returned to consumers. The regulator also plans to minimize procurement risks by funding transferable equipment for multiple projects and assessing bespoke requests individually.
Ofgem’s Akshay Kaul highlighted the urgency to compete in the global race for clean energy infrastructure while delivering value for consumers. Energy Minister Michael Shanks echoed the importance of proactive planning to secure materials and achieve a more affordable and secure energy system.
If approved, the APM could be implemented by early 2025 as a “use-it-or-lose-it” allowance, with the potential for adjustments based on supply constraints.
Recently, Ofgem, approved the initial stages of two interconnector pilot projects, LionLink and Nautilus, aimed at linking the UK’s transmission network with offshore wind farms in the North Sea.