The UK energy regulator, Ofgem, has unveiled a proposed approach to the next electricity distribution network price control, known as RIIO-ED3, which is set to take effect on April 1, 2028. This initiative aims to provide greater stability and predictability for the electrical network supply chain, a move welcomed by the trade association BEAMA, which represents the industry.

The reforms come at a critical time, as the Climate Change Committee has projected that electrical demand in the UK will more than double by 2050. In response, Ofgem’s proposed reforms include requirements for network operators to publish detailed delivery strategies and forecasts of demand volumes. This transparency is intended to smooth out demand fluctuations across the price control periods, thereby reducing the historical “boom-and-bust” cycle that has characterized previous price controls.

Historically, previous price control periods led to low investment in the initial years, leaving manufacturers unable to anticipate demand and often with excess capacity. Ofgem’s new approach seeks to distribute investment more evenly throughout the five-year price control cycle, which is expected to create a more predictable demand for essential network components, including transformers, switchgear, and advanced monitoring systems.

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The emphasis on consistent investment is particularly crucial as the UK competes globally to enhance its electrical product manufacturing capabilities. By fostering a stable environment, manufacturers can make targeted investments in UK facilities, which in turn supports skilled jobs and aims to lower overall network investment costs.

While BEAMA has expressed support for Ofgem’s strategic direction, they have also highlighted the need for more specific incentives for electrical distribution network operators to adhere to their proposed spending commitments. BEAMA’s Chief Executive, Yselkla Farmer, emphasized the importance of regulatory clarity, particularly regarding the phase-out of sulphur hexafluoride (SF6), a potent greenhouse gas used in switchgear. The lack of clarity on this issue has been a barrier to investment in new manufacturing capacity.

The upcoming RIIO-ED3 price control will play a significant role in shaping the future of the UK’s electricity network investment landscape from 2028 to 2033. BEAMA is actively collaborating with electricity networks to develop a sector Growth Plan aimed at maximizing the economic benefits of the networks sector. Initial findings from this collaboration are set to be presented at a roundtable event on December 10, 2023, attended by government officials, with a comprehensive report expected in summer 2026.

The proposed reforms by Ofgem represent a pivotal shift in how the electricity supply chain operates, potentially leading to increased investment in UK manufacturing and job creation across the country. However, the success of these reforms will depend on effective implementation and the establishment of strong incentives for network operators to adhere to their outlined plans.