Flex factor: How government can keep network costs on bills down

Delivering a clean, secure electricity system is essential for a growing economy and for bringing down energy bills. This system will be built on expanded and modernised electricity networks. 

These upgrades are necessary and ultimately beneficial for households, but they come with difficulties. Network costs – the component of energy bills that pays for building and maintaining network infrastructure – are rising sharply. Since 2022, network costs on the average annual household bill have increased by £129. Unaddressed, between 2026 and 2032 they will increase a further £108.

This creates a significant political risk for government. Polling from Public First shows that energy bills remain the living cost that households worry about most, with a plurality (38 per cent) of people identifying them as their biggest financial concern – a problem they overwhelmingly believe is the government’s responsibility to fix (65 per cent). Despite many years of underinvestment, more people hold the current government’s policy decisions responsible (35 per cent) for the cost of living crisis than the previous one (28 per cent).

The government therefore faces a difficult balancing act. It must accelerate the buildout of a modern infrastructure while demonstrating that it is protecting households from unnecessary bill increases in future and delivering tangible benefits now. Failure to do so risks delaying essential infrastructure upgrades vital to electrification and exposing consumers to the continued volatility of global gas markets. 

Government is not striking the right balance. Regulatory and market structures do not incentivise network companies to pursue value for money. Technologies that could reduce system costs – particularly flexibility solutions such as batteries or electric vehicles – face barriers that limit their deployment. 

The government should prioritise solutions to this challenge that deliver visible and measurable benefits to households while improving the efficiency of the energy system.