With aging power networks that were built in the 1950s and 1960s trying to deliver new sources of energy as well as handle increased electricity demand, UK electricity regulator Ofgem says Britain will require a rewire that will cost £32 billion [pdf].
£32 billion is just a fraction of the £200 billion that is estimated to move towards a low carbon economy and provide electricity to consumers over the next 10 years. This estimate is based on funding new sources of energy (wind farms, nuclear, solar, gas), creating smarter networks and grids to connect these new forms of generation and supply the increased demand of electrical transport and heat.
In order to generate the funds Ofgem has created an incentive based model. Dubbed RIIO (Revenue using Incentives to generate Innovation and Outputs), the model proposes lengthened energy price controls, incentives to encourage innovation and efficiency, intrusive regulation for poorly performing companies and an increased voice for network customers.
“The RIIO model will ensure that efficiency and innovation are hard-wired into the network companies. This means the benefits of the green economy, like more skilled jobs delivering smarter networks to allow householders to run solar energy and other types of microgeneration, will be delivered. However there will be no gold plating of the networks at customers’ expense." said Ofgem’s Chief Executive, Alistair Buchanan.
Image Credit: Neil Alejandro via flickr
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