Ofgem launches £4 billion fund to fast-track grid projects and avoid supply chain bottlenecks

Ofgem, the Office of Gas and Electricity Markets of United Kingdom, has created a new 4 billion pound mechanism enabling early-stage procurement of transmission equipment and services to accelerate clean energy infrastructure and reduce delivery risks.

The Advanced Procurement Mechanism (APM) will allow Great Britain"s Transmission Owners (TOs) to purchase essential materialssuch as transformers, cables, and steel componentswell before project-specific cost assessments are complete.

This will avoid the risk of long lead times and secure capacity in an increasingly competitive global market.

This mechanism is part of the UK"s broader ambition to become a clean energy superpower and to deliver a power system based entirely on low-carbon sources by 2030.

Achieving that goal will require upgrading the national electricity transmission network at unprecedented speed, with five times more transmission lines needed by 2030 than were built in the past three decades, according to National Grid estimates.

"It"s a major step on the accelerator as we move towards net zero, states Akshay Kaul, Director General for Infrastructure at Ofgem.

He adds: "The APM is an innovative model that could be scaled in future to support other areas of the energy sector and potentially be mirrored by other regulators focused on infrastructure delivery.

The APM is Ofgem"s response to severe global constraints in the energy transmission supply chain, driven by geopolitical tensions, the COVID-19 pandemic, and surging international demand for clean energy infrastructure.

The International Energy Agency reports that average lead times for cables and large power transformers have almost doubled since 2021, with prices rising by over 50% since 2018.

If TOs continue waiting until full project approvals to procure key equipment, they risk delays that would not only postpone clean energy delivery but also increase emissions and raise consumer bills due to higher constraint costs and greater reliance on gas generation.

Ofgem"s impact assessment estimates that avoiding just 15% of projected constraint costs  around £8 billion by 2030  would offset the total APM expenditure, even accounting for potential procurement risks.

"We must do everything possible to clear the path for pioneering projects to move forward, Kaul affirms. "Acting early is essential to shield consumers from volatility and deliver critical grid upgrades on time.

The APM will be implemented as part of the RIIO-ET price control framework.

Each TO will receive a use-it-or-lose-it" (UIOLI) allowance, enabling them to place deposits for equipment years ahead of need.

The programme"s flexible design includes a confidential APM Register, annual reporting, and an annual re-opener" process to update the scope and funding caps.

Ofgem has also approved £400 million in bespoke procurement, subject to strict project-level reviews.

Equipment eligible for APM funding must be either fungible (interchangeable across multiple projects) or flexible (defined at a high level, with detailed specs finalised later) to minimise stranded asset risks.

Bespoke items are evaluated individually.

To maintain cost discipline, early expenditures are capped at 20% of total equipment value, averaged across portfolios.

This structure encourages TOs to negotiate favourable supplier terms while maintaining agility.

The APM has been welcomed by a majority of stakeholders, with 28 out of 43 consultation respondents supporting the measure.

However, some developers and industry participants raised concerns that restricting the mechanism to incumbent TOs may create competitive imbalances.

In response, Ofgem noted that the mechanism could be extended to other market participants in future, and that the current scale of TO involvement is not sufficient to distort global supply chains.

Energy Minister Michael Shanks emphasised the strategic value of the initiative: "Giving developers a head start in the global race for materials will help prevent delays and protect taxpayers by keeping costs down. He also linked the APM to broader government reforms, including planning process modernisation and faster grid connections.

While there is no local content requirement, Ofgem will monitor and report on the use of UK-based manufacturers to track domestic economic benefits.

This supports national efforts to strengthen the UK"s supply chain capabilities in line with the Clean Power Action Plan published in December 2024.

The APM is viewed as a pivotal tool in de-risking early-stage grid procurement, reducing project delays, and attracting international capital into UK infrastructure.

It reflects a shift towards more proactive, flexible regulation that recognises the urgency and scale of the clean energy transition.

"This is a smart, timely intervention, Kaul concludes. "It demonstrates that regulators can act decisively to unlock investment, reduce delivery risk and ensure the grid is ready for a zero-carbon future.

Read the full APM document below: