The UK’s Ofgem has proposed a new investment fund, the Advanced Procurement Mechanism (APM), to accelerate the country’s transition to net zero by facilitating earlier procurement of key equipment for energy transmission projects.
The fund, estimated to be between £5bn ($6.3bn) and £8bn ($10.1bn), will reduce delays and control costs.
APM would allow transmission owners to secure critical components such as switchgear, cables and steel well in advance, even before project details are finalised.
This approach will ensure that projects are shovel-ready immediately after receiving planning approval, mitigating the risk of supply chain disruptions and cost inflation due to growing global demand for infrastructure materials.
By purchasing materials early, the APM aims to lower or manage construction costs, which are likely to increase over time due to supply and demand dynamics.
Ofgem believes that the APM will be instrumental in achieving the UK government’s target of clean power by 2030 and subsequent net zero objectives.
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By GlobalDataThe proposal aligns with recent independent recommendations to the government by the National Energy System Operator (NESO), which called for a shift in the energy sector to meet the 2030 clean power goal.
Ofgem is aware of the potential impact on consumer bills and intends to implement strict governance rules to ensure the APM is used solely for its intended purpose, with any unspent funds being returned to consumers.
The consultation for the APM, which is open until 18 December 2024, outlines its potential implementation from early 2025 onwards.
It is described as a “use-it-or-lose-it allowance” and includes provisions for adjustments based on changing circumstances.
To prevent the risk associated with stranded procurement, Ofgem will focus on funding equipment that can be used across multiple projects, assessing more unique procurement needs individually to weigh benefits against risks.
Ofgem infrastructure director general Akshay Kaul stated: “The race is on to meet the government’s 2030 clean power target and we are determined to clear the way for trailblazing projects to drive forward.
“Across the world, many countries are stepping up their investment in clean energy at the same time, putting unprecedented pressure on the supply chain as growing demand for essential materials forces up prices and lengthens delivery times.
“Such avoidable delays to construction could cost consumers billions of pounds over the coming years.”
In November 2024, Ofgem approved two pilot interconnector projects linking transmission networks to North Sea offshore wind farms.
