Power Struggle: Delivering Great Britain’s Electricity Grid Infrastructure (Industry and Regulators Committee Report)

Baroness Taylor of Bolton Excerpts

Tuesday 4th November 2025 Grand Committee

Moved by

[Baroness Taylor of Bolton]

To move that the Grand Committee takes note of the Report from the Industry and Regulators Committee Power Struggle: Delivering Great Britain’s Electricity Grid Infrastructure (1st Report, HL Paper 132).

[Baroness Taylor of Bolton (Lab)]

I am very pleased to move that the committee takes note of our report and thank all those who have been involved in the writing of it, especially committee members—and especially those who have done a double shift today, because we had a very significant committee meeting this morning. I also thank our researchers and the whole committee team, who have worked hard on this, as well as our witnesses and those who wrote in with evidence, because it is a complex subject.

I think we can all agree that energy and energy policy is a fast-moving area. Our report was concluded five months ago, and I know that is a normal time it can take for a debate of this kind, but a lot has happened in the interim. Some of it is relevant to our report, and other parts are bigger parts of the Government’s overall policy. The report is very specific, however; it is about the electricity grid and its role in meeting government targets. That is a large enough topic, but it does not take on board energy policy as a whole.

The obvious starting point is to say that the electricity grid is obviously an essential part of modern life. During our inquiry, there were outages in Spain, in Portugal and at Heathrow, which showed just how central the grid is to modern life, how dependent we are on it and the levels of disruption that can be caused when things go wrong. The Government’s growth agenda, which is very clear, focuses on building more infrastructure and supporting energy-intensive industries, such as AI. That will only deepen our reliance on the grid.

We can all agree that the Government have set very ambitious clean power targets; the aim to decarbonise 95% of our electricity system by 2030 is certainly ambitious. The grid will play a crucial part in meeting that target by connecting more new low carbon sources of power to the grid and transporting that power around the country. Meeting the target will involve building new electricity generation and network capacity at a much faster pace than we have managed in recent years. Therefore, our inquiry set out to discover the main barriers to delivering the grid expansion that will be needed to meet that target.

Ofgem, which is the energy regulator, plays a central role in determining the future of the grid to prevent network companies from abusing their monopoly position. Ofgem controls the projects networks can build, the investments they make and the costs they can charge consumers through its price control. In doing this, Ofgem must balance its responsibilities to ensure that affordable energy bills, secure energy supplies and a decarbonised energy system—which can be in conflict—are decided in a proper way. Ofgem also decides how costs are spread between current and future generations, and how they are recouped through energy bills.

These are fundamentally political and distributional choices. For instance, Ofgem is currently trying to wrestle with whether those who are struggling to pay should receive greater support, potentially paid for by other customers. It can be legitimate for regulators to implement these political choices; it happens with a whole range of regulators and their responsibilities. However, there needs to be clear political direction on what the priorities should be. Ofgem’s statutory objectives provide no such sense of priority.

The Government have the ability to provide Ofgem with guidance on these matters, through the strategic policy statement for energy, which was published last February. But it is often the case that the Government give regulators extra instructions without providing the full level of priority that is often needed. We have found with many regulators that Governments give instructions but there is not always transparency on what exactly the instructions mean, and some regulators across the board are concerned about that.

The current Government have indicated that they will provide clearer priorities as part of their review of Ofgem. Can the Minister commit that, as part of the implementation of this review, the Government will provide clarity on how Ofgem should balance the affordability of energy bills with the need for greater investment in the grid? Will the Government change the statutory objectives for Ofgem and provide more detail on what should be the priority? Will the Government provide their own view on how those struggling with energy bills should be supported and how the costs should be met, rather than leaving it to Ofgem to resolve?

I want to say a word about zonal pricing, which the committee spent quite some time discussing. As part of building any new grid infrastructure, it will cost consumers and we believe therefore that there needs to be greater price incentive for major sources of energy generation and a demand for them to locate closer to one another, thus reducing the need for additional grid as far as possible. On balance, after taking considerable evidence on this, the committee decided that it was supportive of the idea to move towards zonal pricing of electricity, which we thought could have enabled better use of existing grid capacity.

One of our members, the noble Viscount, Lord Thurso, who unfortunately cannot be here today, illustrated this to us very clearly by pointing out what could happen in his former constituency of Caithness, where there is abundant power, abundant land and a workforce. If there was zonal pricing, because of the potential for cheap electricity there, that might be a very good place for data centres.

On zonal pricing, though, we recognised and acknowledged that such a move had the potential to impact on investor certainty. We felt that that could be managed but clearly the Government felt otherwise and have decided to retain the existing national pricing system. I understand that the Government and Ofgem plan changes to network charges to try to improve those incentives, but we were doubtful about whether that would have the same impact as zonal pricing. I hope the Minister will consider what the impact will be of retaining national pricing and whether it will limit our ability to make our existing grid more efficient and decrease the amount of grid that would have to be extended going forward.

On connections—another area where we took a great deal of evidence—we heard repeated complaints during our inquiry that new energy-generation projects and businesses seeking connections to the grid face a slow, opaque and unpredictable service from the networks, with many being quoted connection dates of over a decade away. This was because the queue to connect to the grid previously made no judgments at all on whether projects were ready or necessary and simply went on a first-come, first-served basis. This led to enormous queues that theoretically contain more energy generation than we would need even to reach the clean power target. It is generally agreed that many of those applications were, in fact, speculative and very early-stage applications.

Since we were taking that evidence the Government, Ofgem and the National Energy System Operator—NESO—decided to take action to reorder the queue. Networks will be required to offer connections only to projects that have planning permission and are judged to be necessary based on the new projections from the Government and NESO on the types of generation we will need to meet these targets.

These changes are to be welcomed. They are necessary and should enable generation to be conducted to the grid more quickly. NESO and the networks must act quickly to provide these updated connection offers to those hoping to connect to the grid, but we are hearing—even yesterday—from those involved in the sector that this is not happening quickly enough and there is insufficient consultation to make sure that we get the fast-tracking of the connections that are pretty vital to what we need in order to go forward quickly.

Our inquiry also heard some concerns, particularly from the solar and battery sectors, that the current criteria for prioritisation in this queue could cause problems for those who want to have projects that will be needed and will be key to what we do going forward after 2030. We can understand the need to push things forward quickly but I think we need to think of the medium to long term as well as the short term. So before publishing, next year, the strategic spatial energy plan, which will guide these decisions, we believe that NESO must make sure that it is consulting very closely with all forms of generation suppliers to ensure that we get the kind of future investment that we really need.

The reordering of the queue should allow networks to provide a better, clearer and more consistent service to connection customers. We have heard that networks have sometimes provided unsatisfactory levels of service, including significant delays and charges for connections, so we welcome that Ofgem is reviewing the regulatory framework there for connections, and we support its proposals to strengthen the incentives and penalties networks face for their performance. But this does happen. These connection changes have to happen at speed, and they have to happen with a proper amount of consultation with those involved in the sector.

On planning, as in any area of infrastructure delivery it is a key challenge. Certainly it is in terms of delivering new grid projects in the planning system. We support the Government’s plans in the Planning and Infrastructure Bill to allow local authorities to recover the full costs of planning processes and to ring-fence these important pressures on local authorities at the moment. That will be one way of making sure that we get the kind of service that is needed. But we are very concerned that planning authorities do not have the skills and resources—but particularly the skills—that are needed to process these at the speed that is necessary. Skills shortages are a problem not just for planning authorities but across the whole of this area, and it is probably one of the major challenges facing the country as a whole at the moment.

The Government, Ofgem and NESO are all doing very many positive and necessary things—or have committed to do so in the future. But all these elements need to be decided and implemented at pace. It is important that we get the momentum for getting these changes if we are going to meet our clean power target. We believe it is still unclear whether the energy system is capable of moving at the huge scale and pace that is necessary to do so many things in such a short time. We were told repeatedly by many witnesses that the Government’s target for 2030 was possible, but everybody agreed it was very difficult. We were told repeatedly that it is possible, but the key is that failure in any one element of these issues could cause real difficulties in terms of the Government meeting their target.

We have called on the Government to make sure that we are all informed of what is going on. The Government are saying that they are publishing various key indicators, but very often these are hidden in government figures that not only the public but certainly parliamentarians do not always follow with great care. Things on the website are not always the way to find out what is going on. So we would like the Government to commit to clear public statements to Parliament—a drumbeat of information coming forward—so that every six months or so we can just assess how clear it is that the Government and the industry are going in the right direction, and we are moving towards hitting our targets.

The objectives that the Government have set are clear, but so are the potential pitfalls. Time is running out and we cannot have any complacency. It really is time for everybody involved in this industry and in government to pull out all the stops to make sure we can go forward, and it is important that the Government make information available to Parliament and to the public.

--- Later in debate ---

[Baroness Taylor of Bolton (Lab)]

My Lords, I start by thanking everyone for their contributions, and for the fact that the report has had a generally very good reception. The debate has been quite wide-ranging, and we have gone into very granular detail on some occasions, but we have not lost sight of the big picture, which is extremely important. The electricity grid is of fundamental importance to so much of what the Government want to achieve in future, and to so much of what this country actually needs.

As the Minister said, there have been decades of underinvestment, and we need to give urgent attention to this, partly for the resilience of what we have at the moment, because we know we could be vulnerable to outages. We need to meet our net-zero target, and we know that the growth agenda is very much dependent on getting this right, so far as the grid and energy supply is concerned. The grid, the connections and the investment that is needed really have to go right before we can meet all the objectives of resilience, net zero and growth. Part of that, as we have touched on today, is giving confidence to the industry and investors that they can have clarity and stability in the guidance that is coming out from government. That is one reason why we pressed for the Government to be clear about the guidance that they are giving to Ofgem.

I think we are all agreed that the direction of travel is the correct one. I know that the Minister welcomed much that was in our report, apart from zonal pricing. I understand why the Government are reluctant to have change upon change, because there are many moving factors here, all at work at the same time. But we will have to look forward to what Ministers are going to say on pricing and reforming the system, because that is going to be quite important. Mention was made of the Statement yesterday, and I think it is important that we get a comprehensive approach, rather than one where the Government come along every so often and bail out industries that have particular problems with energy. I know that my noble friend Lady Anderson very much appreciates what was done for the Potteries, but I do not think we can go from one lurch of bailing people out to another: we need a comprehensive change.

We have talked about big changes, but actually there have been some small changes that have been very significant, such as having deemed consent when a substation wants to increase capacity. There are many minor things like that, which could be done to help the situation. In fact, we are saying that all these things—connections, planning, skills—are important, but we have to maintain the pace of this change and we have to make sure that we keep industry consulted and on board to have everybody working in the same direction and at the necessary speed. I thank all noble Lords for their contributions and commend the report.

Motion agreed.