2025
Global Power Transmission Report
Regional Market Overviews
United Kingdom
GDP (Current Prices) USD (2023) | 3,382 Bn |
Projected Average GDP Growth (2024-2028) | 1.4% |
10-year Govt Bond Yield (12-month rolling average) | 4.1% |
Country Credit Rating | AA |
Renewable Energy Share | 45% |
Total Transmission Line Length (Km) | 18,770 |
Transmission Network
The transmission network in England and Wales, managed by National Grid, comprises about 7,200 km of overhead and 1,400 km of underground lines at 275kV and 400kV voltage levels (National Grid, 2024). In Scotland, the transmission licences are held by Scottish Power Transmission Limited and Scottish and Southern Energy, which own and manage line length of 5,100 km (SP Energy Networks, 2024) and 5,070 km (SSE, 2024), respectively. Denmark link is the latest interconnector to be commissioned in the UK’s cross-border power infrastructure.
The cross-border interconnector lines constitute an important segment of the transmission network. Lately, power imports have assumed a major role in the country’s cross-border transactions. As of end-2023, the UK power system imported 33,000GWh and exported 9,000GWh (UK Govt, 2024). The cost-effective energy resources of countries such as France (primarily nuclear-based) have been tapped to meet domestic requirements. The UK-Denmark link is the latest interconnector to be commissioned in the UK’s cross-border power infrastructure.
The transmission grid operator is an independent entity that does not hold any ownership stake in the network assets. The UK’s regulatory framework also provides for independent private ownership of offshore power transmission systems under the offshore transmission or OFTO licence. With a rise in offshore wind power projects, the OFTO-based owners are also the major drivers of the network investments. In the onshore part, however, the historical practice of ‘connect and manage’ has progressively exhausted most of the available spare grid capacity. With the grid upgrade long overdue, the utilities are in a catch-up mode against upcoming renewable power generation (BNEF, 2024).
Cross-border Transmission Linkage
| Country Linkage | TSO / Owner | About the Linkage |
|---|---|---|
| France – UK | RTE and National Grid | The first link was operationalised in 1986, with two more links added since then. |
| Netherlands – UK | TenneT and National Grid (UK) | Known as BritNed, built with €600 million investment, a 260 km long HVDC line with 1.0GW capacity, operationalised in 2011. |
| Norway – UK | Statnett and National Grid | Known as North Sea Link, it is a 720 km long HVDC line with a power transfer capacity of 1,400MW |
| Belgium – UK | Elia and National Grid | Nemo link, commissioned in 2019, as a 1GW subsea interconnector |
| Denmark – UK | Energinet and National Grid | The £1.7 billion Viking Link is a 475 mile long undersea and underground line with 1.4GW in power transfer capacity, operationalised in December 2023 |
| Ireland – UK | Eirgrid (owner of East- West interconnector) Mutual Energy (owner of Moyle interconnector) | Two interconnector lines, linking Ireland with Scotland and Great Britain, owned and operated by Eirgrid and Mutual Energy |
Source: National Grid
Drivers in Energy Transition
The UK’s energy transition progress is guided by the overarching goal of achieving Net Zero by 2050 (UK Parliament, 2024). To this end, the energy sector must be fully decarbonised by 2030, implying a massive renewable energy capacity addition, among other measures. These are ambitious goals that involve a drastic transformation of the energy framework.
As of July 2024, a progress report by the UK’s Climate Change Committee (CCC) had findings about the required jump in clean energy generation – by 2030, the country’s annual offshore installations should increase by at least three times, onshore wind installations should double, and solar deployments should be increased by six times (CCC, 2024). The CCC’s additional suggestions were to hasten electrification in transportation and heating. The progress so far lags against the targeted levels. Between 2018 and 2023, the UK’s renewable energy capacity grew at a compound annual growth rate of 4.8% (IRENA, 2024). Annual incremental capacity addition gradually rose in 2022 and 2023 after a sharp decline in 2018.
Even with the moderated growth achieved, there are early signs of grid constraints. One such pointer is the grid balancing cost incurred by the grid operator and recovered from the final consumers. For the year 2023/24, it was £2.4 billion. Though lower than the £4.1 billion in the previous year (NESO, 2024), grid balancing costs are poised to rise with the predominance of renewable energy generation. Apparently, wind farm operators are being routinely paid to back down from generation and thus enable grid balancing. It also triggered a regulatory investigation into possible profiteering in the grid curtailment payouts, especially as the cost is levied from the end consumers (REF, 2024). All the same, the fact remains that the existing transmission is often unable to absorb the surge in wind and solar generation and relies on the balancing mechanism.
Projection done by UK-based think tank Policy Exchange points to a five-fold rise in the curtailment volume, worth over £3.2 billion, by 2030 if the policy target of renewable energy capacity is met in full (Policy Exchange, 2024). The impending bottlenecks are also evidenced in the grid connection queues. For the year 2024, the total capacity tied in the connection queues is estimated at 800GW (it was over 700GW in actual data till October 2024). There are projects whose waiting time extends to the end of the decade, highlighting the mounting infrastructural challenge (BBC, 2024).
Renewable energy is not the only factor changing the UK’s energy mix. Nuclear power is a major policy focus in the decarbonisation framework. In January 2024, the UK government outlined its plan to quadruple nuclear power generation capacity by 2050. It also announced an initial funding of £300 million to support a high-tech nuclear fuel programme, becoming the first country in Europe to do so (UK Government, 2024). Among conventional resources, nuclear power stands out for its emission and long-term costs and is instrumental in reducing dependence on other fossil fuels in the grid.
Presently, natural gas is the only major fossil fuel contributing to a significant share of the UK’s energy mix. The decline in its share over time has been marginal, reflecting its continued importance in the grid supply and management process. Among European countries, the UK ranks as the fifth most dependent on gas- based power (ECC, 2024). A sharp reduction in gas-based power would be among the key prerequisites for progress towards decarbonisation. The phaseout achieved in coal is a good example of the way ahead. By the end of 2023, coal had a negligible share of the total power generation mix. In September 2024, its role ended completely as the last such power plant was closed (Guardian, 2024). This was the 2GW ‘Ratcliff-on-Soar’ coal-fired power station in the UK’s Nottinghamshire, operational for the last 57 years (Enerdata, 2024). The shutdown occurred about a year before the target. It was led in significant part by rising stringency in emission norms and availability of alternate fuel resources.
Policy Regulation
The UK’s government’s policy position on Net Zero and its steep decarbonisation targets prompted steps directed at the power transmission infrastructure. An Electricity Networks Commissioner was appointed in July 2022 to advise about accelerating the power transmission network rollout. Since then, there have been key initiatives, such as the Great Grid Upgrade scheme by National Grid to overhaul the existing assets and the Transmission Acceleration Plan to drastically reduce the end-to-end building time of transmission infrastructure. Among other measures in follow- up to the electricity network commissioner’s recommendation, the government committed to compensating the homeowners supporting the construction of transmission lines in their properties (Power Technology, 2023).
The critical role of the power transmission was also underscored by the UK government’s decision to take control of National Grid’s system operator business. With a £630 million deal in September 2024, the UK’s electricity system operator business (as distinct from the network ownership) was transferred to public ownership and was rechristened as National Energy System Operator. The new entity was entrusted with both electricity and gas networks. The ownership transfer was guided by not only the need for holistic network planning in line with Net Zero objectives but also to avoid the possible conflict of interest with National Grid’s ownership (Guardian, 2024).
There are supportive measures on power transmission from the regulatory side as well. In August 2022, Ofgem, the regulatory body, published guidance for its framework of Accelerated Strategic Transmission Investments (ASTI) as one way to speed up some of the identified projects of strategic importance with modified regulations without compromising consumer interests (Ofgem, 2022). The ASTI framework identified 26 strategic projects, with estimated costs aggregating £20 billion, to be taken up under a streamlined regulatory approval and funding process. The country’s biggest subsea project, Greenlink-2, is one of the ASTI projects that got cost approval in August 2024, making way for its development (National Grid, 2024).
The grid expenditures are generally approved by the regulator based on the regulatory period. The latest rate filings for the power transmission sector refer to 2021-2026. The allowed return on equity varies by grid company benchmarking, with the base rate for transmission set at 6.3% as of 2021. A notable aspect is the total expenditure approach followed in the regulatory assessment of the planned investments. This includes capital and operational expenditures, implying approved returns for those projects that replace capex. In the context of transmission, this could include projects in digitalisation and related technology-based initiatives (BNEF, 2024).
Market Opportunity
The UK’s transmission investments are geared towards the Net Zero goals and the corresponding target of full decarbonisation in the power sector. Between 2015 and 2022, the UK’s grid investment rose at a CAGR of 5%, averaging $6.2 billion annually (BNEF, 2024). The projections point to about $13 billion by 2024, with Scotland’s utilities included. National Grid is the single largest investor and has announced a £37 billion investment plan for the period 2025-2029. This is more than double the amount spent by National Grid in the last five years. There are 17 major onshore and offshore transmission projects under various stages of development. Notably, the interconnector line with Denmark, commissioned in December 2023, is the world’s longest onshore and undersea HVDC cable (National Grid, 2024).
Grid reinforcement and strengthening are being pursued separately under the ASTI and the Great Grid Upgrade schemes, the latter being a much more expansive framework that would enable ASTI as well as any other projects of similar scope. Major preparatory steps in this regard include supply chain arrangements – HVDC supply chain framework launched for the cabling requirements beyond 2030, partnership with seven industry partners to initially help with the design and construction on nine offshore ASTI projects and finalisation of the joint construction contracts on ASTI projects involving Scotland grid operators.
Offshore investments, led by entities under the OFTO regime, constitute another major segment. For the latest rounds of auctions, the regulatory authority has already notified bidding of ten offshore transmission assets worth £7 billion in 2024 and 2025. The shortlisted entity is guaranteed returns for 25 years, while the project developer is repaid the cost of the asset (Renewables Now, 2023). As policy targets emphasise the offshore wind power potential, the OFTO regime has a significant opportunity.
Investments in grid capacity expansion are also taking place through battery storage. The grid operator’s capacity market auctions have lately become a significant catalyst for new battery storage investments. The revenue stream visibility acts as a substantial incentive. Battery storage systems secured 655MW in the capacity market auction held in February 2024, towards the delivery year of 2024/25 (SPP, 2024). Separately, a major investment announcement came from NatPower, a renewable energy startup entity planning £10 billion of capex to set up battery storage of around 60GWh (Guardian, 2024). These developments are indicative of the emerging market opportunity in grid-scale storage, given the rise in renewable energy penetration.
Estimated Transmission Grid Spend
| Year | Spend ($ billion, real 2023) |
|---|---|
| 2024 | 2.6 |
| 2025 | 3.4 |
| 2026 | 3.2 |
Note: Data refers to the National Grid’s capex in England and Wales. It excludes Scottish and OFTO investments.
Source: BNEF
Major Transmission Projects Under ASTI mechanism
| Project | Cost | Planning Commissioning |
|---|---|---|
| Eastern Greenlink – 1 | $3.2 billion | 2027 |
| Eastern Greenlink – 2 | $4.3 billion | 2029 |
Source: BNEF
Outlook
The investment plans drawn by the transmission utilities are aligned with the long-term carbon neutrality targets. The UK’s total grid spending by the end of 2024 is likely to be double that of its past average as utilities simultaneously pursue network renovation, replacement, and expansion. Some of the most vital areas of investment focus are those involving grid connections for offshore wind power. With negligible spare grid capacity in major wind power potential regions, such as Scotland, transmission capacity addition is reaching critical levels. BNEF projections point to about 18GW of offshore wind power capacity between 2024 and 2030 (BNEF, 2024). It is also important to mitigate the rising concerns about grid curtailments, primarily of the Scottish wind power exports.
The investment plans run the risk of massive delays. The recent policy steps to bypass some of the procedural requirements for strategic projects highlight the gravity of the issue. As of October 2024, there were 1,100 renewable power projects delayed due to the long grid connection waiting times (Hausch, 2024). Some of the projects have had waiting times extending to a decade, making it absurd. Barring those projects earmarked for fast-tracking, the transmission utility is generally bound by the first-come-first- serve rules in processing the grid connection requests. As things stand presently, there might be a need to rethink the entire process to ease the bottleneck.