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Oxford has a serious housing problem. With house prices 12 times the average wage, it has become one of the most unaffordable cities in the country. The waiting list at the council house has grown to more than 3,000 households, with many having to live in temporary accommodation.
An obvious solution is to build more homes, but those trying to do so face a major barrier: electricity.
“When I talk to developers or potential developers, one of the first questions they ask me now is about network capacity,” says Susan Brown, leader of Oxford City Council.
As housing developments compete for power against energy-intensive technology companies and the city’s increasingly electrified transportation network, the prospect of connectivity is a cause for concern for homebuilders.
“The problem [for developers] it provides enough power and time to connect to the grid,” says Brown.
The Council appreciates this By 2040, 26,000 new homes will be needed in and around the city, but it is feared that any construction plans could be delayed due to capacity constraints. In the nearby market town of Bicester, this has already happened.
“The latest expansion in Bicester was due to see an extra 7,000 homes and a large retail area built, but these have been put on hold as network reinforcements are needed to take them further,” said Brown, who is also deputy Chair of the District Councils Network, a cross-party group of 169 district and unitary councils in England. “I don’t think Oxfordshire is unique at all. I know this is becoming a pretty big issue across the country.
This inability to build enough homes is not a new problem. Over the past decade, the slow pace of construction has meant the Govt the target of 300,000 homes per year has been repeatedly misseduntil the housing crisis worsened.
Funding and planning problems are routinely blamed for the country’s supply woes; the lack of electricity is rarely cited as a reason why housing is not built – until recently.
“Providing capacity has always been a priority, but over the past 18 months it has become a significant barrier and a real challenge for developers across the country,” said Vicky Spiers, chair of the Independent Networks Association, whose members are responsible for connecting 80% of new homes in the UK to the network.
And as households move away from using fossil fuels to heat homes and power cars, the challenge will only grow.
“We can see examples of delays in development due to grid capacity,” says energy expert Adam Bell of Stonehaven Consulting. “This problem will only get worse in the future without expansion of the distribution network.”
Just like the capacity issues facing housing estates, the country’s power system is complex and growing.
National Grid is responsible for the transmission grid, which acts as a highway carrying electricity from energy sources to other parts of the country on high voltage lines.
Then come 14 distribution network operators (DNOs), the equivalent of A-roads, all responsible for distribution within a given region. They connect either directly to housing estates or, more often, through independent network operators.
In a country where electricity use is expected to increase by 50% by 2035 as millions of electric cars and domestic heat pumps are switched on, the transmission grid will require significant upgrades at a cost of tens of billions of pounds. But it is precisely at the distribution level, the A roads, that the biggest obstacles to housing construction come.
Operators are often left to wait for major upgrades to national grid transmission to provide extra capacity to their network, but five-year funding cycles set by regulator Ofgem mean local upgrade plans can become outdated with changes in demand.
Bell says, “These [cycles] it makes sense in a funny world where demand grows through economic growth and population growth, but now that we’re electrifying things, more data centers are coming online and the view taken five years ago will be wrong.”
Even when upgrades or new connections are agreed, completion can take years. Spiers says this is forcing more and more developers to freeze construction projects.
The Observer has spoken to several developers who have had to scale back, change or cancel their plans due to power capacity issues.
A developer was forced to downsize a complex of more than 80 homes to fewer than 20 because he could not provide enough electricity. Another said capacity constraints meant it had to reduce the number of electric car chargers at a site.
In an extreme example, a building firm canceled a planned development of almost 100 homes after a £570,000 fee to secure a new connection made the scheme unviable.
The most famous example of electricity shortages causing housing delays is in the west London boroughs of Hounslow, Hillingdon and Ealing. The area has become popular in recent years with data center developers thanks to the fiber optic cables that run along the M4 corridor to the Atlantic Ocean. Crucially, for an area with a severe housing shortage, they have sucked up capacity that could be used for vital housing schemes.
In 2022, the Greater London Authority sounded the alarm about the electricity shortage, warning that all development in the area could be halted until 2035 when new transmission links will be built.
The construction of new infrastructure has now restarted and the National Grid and Scottish and Southern Electricity Network (SSEN) have come up with solutions to reduce demand. These include speeding up smaller residential projects and striking deals with developers to build projects in phases to better accommodate additional capacity added to the grid.
But while progress has been made and 7,800 homes have now been connected, 3,900 planned units, including 1,855 affordable homes, are still waiting to get power.
Situations like the one in west London will become more common as the government’s Future Homes Standard legislation incentivises home electrification. The new law, which will come into effect next year, will reduce the maximum permitted carbon emissions of all new homes by 75%-80%.
David Adams, strategic adviser at the Future Homes Hub (which was set up to develop a long-term delivery plan for the sector), says this will effectively ban the use of fossil fuels in homes and make electric heat pumps the only option.
According to the National Electricity Network Operator (ESO), the body that ensures supply meets demand on the grid, heat pumps will require 80 terawatt hours per year by 2050 if the country is to meet its decarbonisation target. This is four times the current usage, but achieving it may be hampered by capacity constraints.
Last year Reading Borough Council raised concerns that its zero-emissions ambitions could be curtailed due to SSEN restrictions on new connections. With more than 220 heat pump homes planned to be built, nearly two-thirds have been converted back to gas after capacity concerns were raised.
“We had a contractor who wanted to install air source heat pumps, install electric car chargers, but he couldn’t get the capacity and had to go back to planning so he could install gas boilers,” says Mickey Leng, planning for I lead the council. “This is a huge problem that has the potential to jeopardize the country’s race to the ground.”
The Energy Networks Association, the body that represents district grid operators, says connection problems are rare for residential projects, but where they do occur, operators are working to find solutions. It added that in most cases connections usually take just over a year from the time a request is made, and that in the past year its members have provided enough additional capacity to power a million homes.
But the Federation of Home Builders says it is becoming a bigger problem for its members and will only get worse. A spokesperson says: “Moving away from gas for heating will increase electricity use and we have seen elsewhere that if there is no grid capacity, the answer is to not allow new housing.”
Modernizing the infrastructure of both the National Grid and the distribution network will be key to this.
Future Home Hub’s Adams suggests that smart energy technologies could provide a solution by making more efficient use of existing capacity, and that installing batteries in residential schemes could also help.
DNOs are also increasingly adopting “flexibility models” where they buy excess power from local power generators, such as homes or businesses with solar panels, to augment supply from the grid.
For Brown, the solutions for Oxfordshire can’t come soon enough. She says: “What worries me is that it delays housing, makes it more expensive and affects our ability to make housing zero-carbon, which is so important.”
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