£3.4bn in funding has been approved for the UK’s ‘single largest electricity transmission project’, the first of 26 projects being considered
UK energy regulator Ofgem has approved the cost of installing a 2 gigawatt subsea electricity transmission cable that will boost grid capacity and could power up to 2mn homes.
Ofgem has greenlit a £3.4bn funding package for the project, which it described as an “electricity superhighway”. It will be developed by Scottish and Southern Electricity Networks Transmission, alongside National Grid Electricity Transmission, with SSEN claiming it will be the “UK’s single largest electricity transmission project ever”.
SSEN and NGET will now be able raise capital from investors to fund the project, with the costs ultimately recovered via end customers’ energy bills
The 506km cable, known as Eastern Green Link 2, will link Peterhead in the north-east of Scotland and Drax in North Yorkshire, England, and is due to be operational by 2029, Ofgem said. It will include the longest high voltage direct current subsea cable in the UK.
SSEN said it expects the cost of the project to reach £4.3bn due to inflation, rather than Ofgem’s £3.4bn assessment. However, Ofgem has confirmed to Sustainable Views that it will not be increasing the approved funding package at this stage, which has already been revised upward from SSEN’s original £2.1bn bid.
However, the regulator has created a “reopener mechanism”, which would enable it to review the agreed funding in light of “increased risks and new areas of uncertainty”.
Accelerating transmission investment
The project is one of 26 connection projects receiving fast-tracked funding approval under Ofgem’s Accelerated Strategic Transmission Investment framework, which seeks to “boost” the UK’s grid capacity, Ofgem said.
Collectively, these projects are expected to deliver around £1.5bn in savings as they will reduce the need for energy generators to be paid to stop producing electricity at times of high wind, due to insufficient grid capacity.
Other projects that are currently under consideration by Ofgem within the ASTI scheme include the £294.8mn Yorkshire Green Energy Enablement project to upgrade local electricity networks to help transport energy generated by Scottish and North Sea wind farms, expected to be operational by 2027.
Also under consideration is the North London Reinforcement Project, which will replace existing 275 kilovolt overhead lines with higher-voltage 400 kilovolt overhead lines.
The ASTI “accelerates approval times for projects . . . by up to two years”, said Ofgem chief executive Jonathan Brearley.
The UK’s electricity system operator, National Grid ESO, published a report in March 2024 calling for £58bn of additional direct investment into the UK’s electricity grid by 2035 in order to prepare it for a decarbonised energy system.
“The UK’s grid capacity has been a major barrier for investors looking to put their money into UK renewables,” said James Alexander, chief executive of the UK Sustainable Investment and Finance Association in a statement shared with Sustainable Views. Almost half (44 per cent) of energy companies “have faced challenges securing a grid connection”, he added.
Clean power system by 2030
Sarah Jones, industry minister with the UK’s Department for Energy Security and Net Zero, said in a statement that Ofgem’s announcement will support the government’s “mission for clean power by 2030”.
“We need a grid capable of transporting homegrown energy from renewable sources to power up our homes and businesses,” she added.
Ofgem’s Brearley added that the ASTI will “speed up network regulation” to achieve the government’s 2030 goal.
“The UK’s creaky electricity grid is in desperate need of an upgrade,” Juliet Phillips, programme lead for think-tank E3G’s UK energy team, told Sustainable Views.
“Over the past two and a half years, grid constraint has resulted in electricity consumers paying nearly £2bn more than if there had been sufficient grid capacity to transport renewable energy to where it was needed,” she added.
Ofgem’s announcement is a “welcome step forward” and will help the UK “get on track for the 2030 clean power target”, Phillips said.
The government should also deliver plans to reform network policy and upgrades and ensure “good community engagement and nature-positive solutions to boost public acceptance and buy-in”, Phillips added.