£28 Billion Network Upgrade Approved: Essential for Net Zero, but Energy Bills will rise first...

On December 4, 2025, Ofgem approved an initial £28 billion investment in Britain's gas and electricity networks for 2026–2031 (RIIO-3 price controls), the largest since the 1960s, with potential to reach £90 billion by 2031 as projects scale.

• Breakdown: £17.8 billion for gas transmission/distribution (maintenance/resilience); £10.3 billion for high-voltage electricity transmission (expansion for renewables/EV/heat pumps).

• Scope: Funds 80 major projects (new cables, substations) across England, Scotland, Wales, cut £4.5 billion (15%) from companies' £33 billion proposals via scrutiny.

Ofgem calls it vital for security, resilience, and clean power transition, whilst being absolutely essential to shielding Britain from imported gas volatility.

Impact on Bills:

• Gross Increase: +£108/year by 2031 for average dual-fuel household (£48 gas + £60 electricity network charges).

• Net Estimate: Closer to +£30/year (<£3/month) after ~£80 savings, including £50 from electricity upgrades reducing constraints/curtailment and gas reliance.

• Smoothing: Charges rise gradually (lower initial 2026 impact); funds released only as needed, clawed back if unused.

In practice this means that we are going to see a lot of front-loaded costs for long-term gains, with households feeling the pinch first.

Why This Investment Matters: Building a future-proof system

Strategically, the upgrades address urgent needs:

• Resilience & Security: Maintains safe gas networks while preparing for shifting demand.

• Enabling Clean Power: Expands capacity for renewables connection, storage, electrification (heat pumps, EVs), cutting curtailment payments (£1–2 billion/year wasted on wind shutdowns).

• Lower Volatility: Reduces exposure to global gas prices; supports industrial growth and energy-intensive sectors (potential 10–15% lower bills for some businesses vs. no-investment scenario).

• Economic Upside: Attracts investment, boosts productivity, unlocks green opportunities.

The main point from Ofgem is that we need to invest now in order to avoid paying higher costs later.

Why Concern Is Mounting: Timing, fairness, and uncertain payoffs

The logic holds, but public perception and political reaction highlights some real pain-points in this announcement. The major being the mixed message that it sends to 'Joe Public' or 'Ordinary Jane' as the government continuously push how they will save each household £300 on their energy bills, against a backdrop of constant noise around how energy bills are actually increasing!

The timing is brutal, bills are already high, and households are being asked to pay more before benefits materialise: Annual energy costs remain elevated across many UK households. To add a further £108 a year in network charges, even if “smoothed out”,comes at a moment when many families are struggling with cost-of-living pressure.

The savings are speculative and long-term: The claimed £80 savings rely on wholesale-price reductions, fewer constraint payments, and smoother grid operation, all of which assume that renewable deployment, storage roll-out, and grid balancing succeed at scale. Given the delays and uncertainties in UK energy infrastructure and clean-power rollout, those savings are not guaranteed.

Hidden additional costs (green subsidies and levy effects): On top of network charges, many households are already shouldering the costs of green subsidies and renewable-energy support mechanisms. According to media reporting, households could pay “billions more” over the coming years via levies to fund new renewables auctions (such as the upcoming “allocation round 7” / AR7), which were not clearly outlined in the recent Budget. The result: the burden of transforming the energy system is being passed onto bill-payers, often before they see the benefits.

Mixed messages from government and conflicting promises: The timing clashes brutally with government political messaging: for example, the ruling party has recently promised to deliver energy-bill savings for households (publicly talking about cuts), yet at the same time new levies, network-upgrade charges and subsidy costs are coming, potentially wiping out any promised savings. The contrast in rhetoric and reality risks undermining public trust.

Risk to social equity and public support for transition: Higher bills hit low-income, vulnerable households hardest. As green levies, grid-upgrade costs, and subsidy contributions rise, the poorest may bear a disproportionate share, risking social backlash, fuel-poverty escalation, and resistance to further green policies.

How this fits with AR7, renewables funding and subsidy-cost burdens

Reports suggest that the UK is about to launch its next big renewables auction cycle, known as “Allocation Round 7” (AR7). To pay for this, the non-party political think-tank analysis cited in recent media suggests households may pay £1 billion a year extra via energy bills, effectively underwriting new subsidy commitments for clean power.

Because these costs were not transparently included in the government’s most recent Budget, many households are now waking up to a reality where their bills will rise for infrastructure upgrades and green-subsidy funding — potentially undermining support for the energy transition, especially among working-class and low-income households.

Conclusion: Necessary step, but fairness and delivery are key

The Ofgem decision is defensible and very much needed: the UK’s energy system needs urgent upgrades if the country is to deliver on net-zero targets, renewables rollout, energy security, and electrification of heat and transport - all steps that are required to pass on cost-savings in the future.

In principle, building the right infrastructure now could economise costs later and prevent volatility. But from a social and political standpoint, the way these costs are being passed to households, without transparent, short-term benefits, is concerning. Combined with rising green levies and subsidy costs, it leaves many consumers with a bitter question: why should they pay more now if savings aren’t guaranteed, and if promised bill reductions look increasingly unlikely?

For a government that pledges to “cut energy bills,” this is a moment of reckoning. Without clarity, fairness, and genuine protection for vulnerable households, the push for net-zero infrastructure risks becoming a source of deep public discontent, undermining both the political and moral case for the energy transition.

Maybe a smarter focus could be around exploring how foreign owned energy firms could be better incentivised to stop shipping £ billions abroad in dividends, and instead reinvest in UK infrastructure, but that's for another blog!