The latest annual report from Ofgem on RIIO-ED2 reveals a mixed picture for electricity network investment, one that highlights both ongoing challenges and signs of improvement.

 

In 2024 / 25, distribution network operators (DNOs) underspent their allowances by £280 million, contributing to a cumulative shortfall of £841 million across the first two years of the price control. All six DNOs are underspending on load-related investment by around 35% on average, particularly in areas like network connections and primary reinforcement. 

Network operators cite long lead times, supply chain constraints, and rising material costs as key barriers. These pressures are also affecting non-load related work, such as asset replacement, which remains below planned levels. While underspending has reduced compared to the first year of ED2, suggesting some improvement, delivery is still not where it needs to be. 

This pattern points to a familiar challenge: the “boom and bust” cycle of network investment. Slow delivery in the early years creates a dip in orders for the supply chain, followed by a rush to catch up later in the price control period. That volatility makes it harder for suppliers to plan, invest and scale. 

Breaking this cycle will be critical. As Ofgem looks ahead to ED3, following through on proposals to smooth investment and provide clearer demand signals will be key. A steadier pipeline of work would give suppliers the confidence to grow. helping ensure the UK can deliver the infrastructure needed to electrify the economy.