Investing in green energy is now the secure and more affordable option

Energy systems across the globe are undergoing a seismic change due to the extraordinary increases and volatility in the price of gas. This is having a major economic impact and driving the cost-of-living crisis. Ofgem’s first responsibility is to protect consumers, and our short-term priority has been to prevent further costs being added to bills, boost financial resilience in the market to prevent further supplier failures and firmly hold suppliers to account on how they treat customers.

In the longer term however, we should recognise that the high price of fossil fuels is likely to be sustained. The crisis has exposed our vulnerability to the volatility of global energy markets, and underlines the importance of moving further and faster to develop a greener, smarter, more flexible and resilient energy system that will protect the economy against future price shocks.

This will require billions of pounds of new investment across local energy grids, and today Ofgem unveiled our five-year settlement with electricity network companies to help deliver it. This provides upfront funding to boost grid capacity, with flexible arrangements to reflect changing demands over time, and delivered via efficiencies and reduced investor returns, meaning consumers won’t pay any extra network charges.

This investment reflects a fundamental reality about our future energy system: fossil fuels will play a much-diminished role. Even before the crisis, many forms of low carbon generation had become cheaper than conventional generation. With the gas crisis bringing volatility and price increases, the economic case is overwhelming. The economics of energy have fundamentally changed; there is greater alignment than ever before between the desire for homegrown renewable energy and the affordability and security of our energy supply. Green energy is now also the secure and more affordable option.

Last October, the UK Government pledged to decarbonise electricity generation by 2035, and following Russia’s invasion of Ukraine, published the British Energy Security Strategy, setting more ambitious targets to reduce reliance on expensive gas imports, including developing 50GW of offshore wind by 2030 and achieving a five-fold increase in solar power by 2035.

This will require substantial upgrades across the electricity network: preparing the way for increases in the generation of cheaper, greener, home-grown energy to bring down bills in the long-term, improving customer service and resilience to prevent power outages, such as those seen last winter, and a major expansion of our transmission network to get energy where it is needed.

A smarter, more flexible grid will also give consumers more control to save money through access to better data and more regularly updated prices. New smart technologies are emerging which can draw energy from the grid at cheaper rates when demand is low, or it is sunny or windy. This means electric vehicles could recharge during low demand or high generation and actually put electricity back into the grid during high demand or low generation, saving the EV owner money, and reducing costs for all electricity bill payers by storing electricity for, literally, a rainy day.

This will help balance out power use and reduce the need for costly new generating and grid capacity, saving customers up to ￡10 billion a year in the long term, helping keep costs down and achieving our climate change goals at the same time.??

The energy crisis presents formidable challenges, but it also makes the path ahead clearer. A rapid transition that seizes the best of modern technology to level out demand and reduce costs for consumers will pave the way out of relying on fossil fuel imports that leave the UK’s homes and businesses at the mercy of volatile global prices. The opportunity to build a low-carbon, low-cost and resilient energy system that works for both consumers and the climate is real, and I believe today’s plans will play a crucial role in grasping it.