RIIO-T3 and Climate Risk: Building the Evidence Base Ofgem Expects

RIIO-T3 is the UK’s price control framework for electricity and gas transmission running from April 2026 to March 2031, and it marks a turning point for how grid operators must evidence climate resilience. Ofgem now expects forward-looking climate data, not historical weather baselines, to justify investment in network adaptation.

The current price control period, RIIO-T2, ends on 31 March 2026. What replaces it is not simply another funding cycle. RIIO-T3 arrives with a fundamentally different expectation from Ofgem: that transmission operators can demonstrate, with evidence, how their networks will withstand the climate conditions of the 2030s and beyond.

For regulatory affairs teams and asset managers at National Grid Electricity Transmission, SP Energy Networks, and SSEN Transmission, the question is no longer whether climate resilience belongs in the business plan. It is whether the evidence base behind it is strong enough to survive Ofgem’s scrutiny.

What Is RIIO-T3?

RIIO-T3 (Revenue = Incentives + Innovation + Outputs) is the five-year price control for Great Britain’s electricity and gas transmission and gas distribution sectors, running from 1 April 2026 to 31 March 2031. Ofgem published its Final Determinations on 4 December 2025, approving GBP 28.1 billion in upfront total expenditure across the regulated sectors, with a wider investment pipeline of approximately GBP 90 billion over the period.

The allowed return on equity for electricity transmission sits at 5.70% (CPIH-real, post-tax), with the weighted average cost of capital ranging from 5.49% to 5.73% across the three electricity transmission operators. This is a significant step up from the 2.81% WACC in RIIO-2, reflecting the scale of investment Ofgem expects networks to deliver.

The three electricity transmission companies covered are National Grid Electricity Transmission (NGET), SP Energy Networks (SPEN), and Scottish Hydro Electric Transmission (SSEN). Each submitted detailed business plans, and all three included dedicated Climate Resilience Strategy annexes for the first time.

Why Climate Resilience Is Now a Regulatory Requirement

RIIO-T3 is not the first price control to mention climate. But it is the first where Ofgem has structured its expectations around forward-looking climate evidence as a core part of asset stewardship.

Ofgem’s Sector Specific Methodology Decision makes this explicit: network companies must demonstrate “strong asset stewardship” that safeguards reliability. That stewardship now includes climate scenario planning, stress-testing for high-impact and low-probability hazards, and adaptation pathways with measurable outcomes. In practical terms, Ofgem is asking operators to prove that their capital plans are designed for the climate of the 2030s, not the climate of the 2000s.

This shift matters because much of the UK’s transmission infrastructure was designed and built under assumptions about weather conditions that are becoming less reliable. Flood return periods are shortening. Heat thresholds are being exceeded more frequently. Wind loading patterns are changing. The engineering margins that were once conservative are, in some locations, being tested.

As one senior R&D lead at a major UK utility put it: “Everyone seems to think that asset health is resilience. It’s not. It’s something completely different.” Asset condition tells you how degraded a piece of equipment is today. Climate resilience tells you whether that equipment can perform its function under the conditions it will face tomorrow. RIIO-T3 demands both.

What Ofgem Expects in the Evidence Base

Ofgem has not published a prescriptive checklist for climate evidence. But the language across its RIIO-3 Final Determinations, the Sector Specific Methodology Decision, and company-specific annexes makes the expectations clear. Three pillars emerge.

Climate scenario planning. Operators need to demonstrate they have assessed their networks against multiple climate scenarios, not a single projection. This means considering different emissions pathways, different time horizons, and the range of plausible outcomes for hazards that affect transmission assets: flooding, extreme heat, wind, ice loading, and compound events.

Stress-testing for severe hazards. Ofgem expects operators to identify and test against high-impact, low-probability events. A 1-in-100-year flood that inundates a critical substation is not a hypothetical; it is a scenario that must be planned for, costed, and mitigated.

Adaptation pathways. It is not enough to identify risks. Ofgem wants to see how operators intend to manage them, with evidence that the chosen measures deliver measurable resilience improvements. National Grid’s RIIO-T3 plan includes flood defences at more than 130 sites identified as most vulnerable and the development of “resilient by design” standards for new infrastructure. These are specific, auditable commitments tied to identifiable risks.

One innovation leader at a UK utility described the practical challenge: “We need metrics that allow us to communicate to our regulators that our assets aren’t resilient to climate change because it’s accelerating. Those sorts of metrics help us explain in our business plan what we need to do in the next five years.”

The message from Ofgem is that asset health data alone, condition scores, age profiles, historical fault rates, is not sufficient. The evidence base must include forward-looking climate intelligence that connects physical hazards to operational and financial outcomes.

How to Build Climate Evidence for Your Business Plan

For operators preparing their ongoing RIIO-T3 submissions or positioning for RIIO-T4, the practical question is how to assemble an evidence base that meets Ofgem’s expectations. Four steps form a credible framework.

Step 1: Map Asset Vulnerability Under Future Scenarios

The starting point is understanding which assets are exposed to which hazards, and how those hazards are projected to change. This means moving beyond age-based and condition-based risk registers to overlay climate hazard projections onto specific asset locations and engineering specifications.

For substations, the critical variables are flood depth at foundation level and ambient temperature affecting transformer ratings. For overhead lines, it is wind loading on conductors and towers, ice accretion, and the frequency of heavy precipitation events that increase vegetation contact. Each asset type has specific thresholds where climate conditions begin to degrade performance or cause failure. Forward-looking climate models, rather than historical weather files, are what reveal whether those thresholds will be crossed more often in the 2030s.

Step 2: Quantify Financial Impact in Regulatory Language

Ofgem evaluates investment cases in financial terms. Climate evidence gains traction when it translates hazard exposure into metrics the regulator recognises: expected annual loss, the cost of reliability degradation, and the projected impact on SAIDI and SAIFI if resilience spending is deferred.

The question to answer is not “this asset is at risk” but “deferring this investment will cost X in additional fault repairs, Y in regulatory penalties, and Z in system reliability degradation over the RIIO-T3 period.” When climate risk is expressed as a line item, it becomes defensible.

Step 3: Demonstrate Adaptation ROI

Regulators are rightly sceptical of open-ended resilience spending. The evidence base needs to demonstrate that specific interventions pay for themselves within a defined timeframe. Flood barriers at a substation with quantified avoided damage costs. Conductor upgrades on feeders where projected precipitation increases will drive fault rates above current levels.

A practitioner at a UK utility captured the challenge well: “Regulators sometimes think that over-investing is the answer. But oversized assets use more energy to run. That’s not informed resilience; you need robust metrics that show where you are versus where you need to be.”

The financial case for grid resilience rests on specificity. Generic “climate hardening” programmes are hard to justify. Targeted interventions with calculated breakeven points are not.

Step 4: Embed Climate Intelligence in Operations

Climate resilience is not a one-off business plan exercise. Ofgem’s language around “embedding climate resilience in network operations” signals an expectation that climate data feeds into ongoing decision-making: seasonal risk forecasting, maintenance scheduling, contingency planning, and capital prioritisation.

Operators that integrate climate intelligence into their operational systems, rather than producing it solely for regulatory submissions, will find it easier to evidence their approach in future price control periods. The RIIO-T3 evidence base should be a living dataset, not a static document.

What the Three TOs Are Doing Differently

Each of the three electricity transmission operators has taken a distinct approach to climate resilience in their RIIO-T3 submissions, though all share a common direction: moving from reactive to proactive, evidence-based adaptation.

National Grid Electricity Transmission submitted the most detailed public strategy. Their GBP 35 billion business plan, with GBP 26.5 billion designated for net zero objectives, pairs the flood defence programme described above with “resilient by design” standards for all new infrastructure and a commitment to maintain network reliability (currently 99.999998%) despite the scale of network growth required.

SP Energy Networks published a dedicated Climate Resilience Strategy as part of their GBP 10.6 billion plan for Central and Southern Scotland. The strategy addresses five climate variables: precipitation, sea level rise, coastal erosion, temperature, and storm/wind events, each mapped against asset vulnerability.

SSEN Transmission focused its RIIO-T3 plan on the pathway to 2030, with significant investment in network resilience to support the integration of new renewable capacity across Northern Scotland. Their approach emphasises that the grid must not only grow but grow in a way that is resilient to the conditions it will operate under.

The common thread across all three: climate resilience has moved from an annex concern to a strategic priority. And each operator’s ability to secure the funding they need depends, in part, on how well they evidence that priority.

Why RIIO-T3 Is Just the Beginning

RIIO-T3 is a five-year framework, but the regulatory trajectory it establishes extends well beyond 2031. Ofgem’s wider investment pipeline of approximately GBP 90 billion signals that grid investment is not a one-off cycle but a sustained, multi-decade programme.

In parallel, the UK is developing resilience standards for critical infrastructure, and the Future System Operator’s Centralised Strategic Network Plan (CSNP) will provide an independent, coordinated approach to longer-term network planning. European regulators are moving in the same direction, with the EU Grids Package introducing parallel requirements for grid operators to demonstrate climate adaptation.

One utility engineer captured the opportunity well: “Resilience standards are coming. What matters is being part of that conversation, because if regulators make the decision without understanding the assets and processes, the standards won’t reflect operational reality.”

The operators who build a credible, forward-looking climate evidence base during RIIO-T3 will not only secure the funding they need for 2026 to 2031. They will set the baseline that defines how climate resilience is measured, funded, and delivered for the next generation of UK grid infrastructure.

Frequently Asked Questions

When does RIIO-T3 start and how long does it last?

RIIO-T3 runs from 1 April 2026 to 31 March 2031, a five-year price control period. Ofgem published the Final Determinations on 4 December 2025, and licence modifications were finalised in February 2026. It replaces RIIO-T2, which covered 2021 to 2026.

How much investment has Ofgem approved for RIIO-T3?

Ofgem approved GBP 28.1 billion in upfront total expenditure across the electricity and gas transmission and gas distribution sectors, with a wider investment pipeline of approximately GBP 90 billion over the RIIO-3 period. Electricity transmission operators received a 16% increase from the Draft Determinations stage, though total allowances remain approximately 15% below what companies originally requested.

What climate resilience evidence does Ofgem expect from transmission operators?

Ofgem expects three types of evidence: climate scenario planning using forward-looking projections (not historical baselines), stress-testing against high-impact and low-probability hazards such as severe flooding or extreme heat events, and defined adaptation pathways with measurable outcomes. Climate adaptation strategies should align with ISO 14091 standards, and the most commonly referenced climate projections are the Met Office’s UKCP18 scenarios covering temperature, precipitation, sea level rise, and wind patterns over the next 25 years.

How does RIIO-T3 differ from RIIO-T2 on climate resilience?

RIIO-T3 is the first price control period where all three electricity transmission operators submitted dedicated Climate Resilience Strategy annexes as part of their business plans. The shift is from a retrospective approach, relying on historical weather data and condition-based asset health, to a forward-looking approach using climate projections, scenario analysis, and quantified adaptation measures. RIIO-T3 also brings a significantly higher WACC (5.49-5.73% vs. 2.81% in RIIO-T2), reflecting the scale and urgency of investment required.

Which transmission operators are covered by RIIO-T3?

Three electricity transmission operators are covered: National Grid Electricity Transmission (NGET), covering England and Wales; SP Energy Networks (SPEN), covering Central and Southern Scotland; and Scottish Hydro Electric Transmission (SSEN), covering Northern Scotland and the Scottish islands. Each submitted separate business plans and climate resilience strategies to Ofgem.

Can grid operators still use historical weather data for resilience planning?

Historical data remains useful as a baseline, but it is no longer sufficient on its own. Ofgem’s language throughout the RIIO-3 process signals an expectation that operators transition to forward-looking climate intelligence. The most significant hazards identified for UK transmission networks over the next 25 years, including rising temperatures, coastal erosion, and increasing flood frequency, are all projected to intensify beyond historical norms. Asset management strategies based solely on past conditions will systematically underestimate future risk.