NAO warns that grid upgrades must accelerate to avoid billions in extra costs

The National Audit Office has warned that upgrades to the nation’s electricity grid need to accelerate to avoid rising costs being passed on to consumers.

When the grid cannot carry enough electricity from where it is produced to where it is needed, the National Energy System Operator (NESO) intervenes to keep supply and demand in balance with so-called constraint costs – which has normally meant paying wind farms to turn off and gas plants to turn on, the NAO said.

However, it warned in a critical new report that these costs, which totalled £1.9 billion in 2025-26 could increase fourfold to £7.8 billion by 2030 without ‘concerted action.’

Ofgem estimates that £70 billion of investment is required in the grid between 2025 and 2031. The regulator estimated this will increase the network charges paid by consumers by £60 by 2030, but save them £30 overall compared to the increased constraint costs if projects are not accelerated. But the NAO said this upgrade timetable would be “very challenging.”

Gareth Davies, head of the NAO, said:

While DESNZ, Ofgem and NESO have started to improve the way they work together, the planned upgrades of the electricity grid will test systems not designed for activity at this pace or scale. Value for money now depends on delivery. Failure to implement these necessary grid upgrades will hamper economic growth as well as increase consumer bills.”

Of the 80 projects NESO identified as necessary in its 2024 Clean Power advice, 64 are ongoing. Most are at an early stage of development and are not expected to be connected by the dates NESO originally said would be optimal for keeping constraint costs down between now and 2030. Many also face significant risks to the delivery of their current forecast delivery date, the NAO said.

NESO identified three projects that needed to be accelerated to meet Clean Power 2030 and eight others where acceleration would also reduce constraint costs, but there has not been a significant acceleration in any of these projects so far, the NAO added.

Most of the grid upgrades NESO recommended were chosen because they were already in development. But the NAO concluded:

In the absence of an integrated plan or whole-system appraisal, the report finds, the government has not demonstrated that these projects represent the best way of achieving its objectives…The wider economy will also suffer if the grid capacity is insufficient to meet rapidly growing demand for new connections.”

The report notes that DESNZ, NESO and Ofgem have started to tackle blockages in the system such as planning, access, skills shortages and supply chains. But NAO recommends that these organisations strengthen their oversight of the upgrades, improve transparency over the cost and progress of each project, and review options for what to do with new generation projects that are due to connect to the grid before it is ready.