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      RIIO-T3 represents a fundamental step-change for the UK transmission sector: unprecedented delivery volumes, tighter regulatory scrutiny, and a global supply chain under acute strain.

      Ofgem’s RIIO‑T3 determinations authorise approximately £28 billion of upfront investment, with the wider programme expected to reach around £90 billion by 2031¹. This represents a material step‑change from RIIO‑T2. The scale-up is driven by the significant expansion of HVDC infrastructure, offshore network integration, and accelerated connections and grid upgrades required to enable future renewable energy deployment. Yet, this surge arrives at a moment when global demand for grid infrastructure is outpacing supply chain ecosystem capacity, with longer lead times, finite manufacturing, and constrained skilled labour now defining the operating environment²⸴³.

      The result is a structural tension at the heart of RIIO-T3:

      The primary constraint is no longer capital or engineering expertise alone—it is the capacity of the supply chain ecosystem.

      Peter Millar
      Peter Millar

      Director, Major Projects Advisory

      KPMG in the UK

      Mehrnoush Sarafan
      Mehrnoush Sarafan

      Manager, Major Project Advisory

      KPMG in the UK

      To succeed, Transmission Owners (TOs) must adopt a market‑shaping approach. Incremental procurement optimisation is unlikely to be the answer. Traditional procurement models will not secure the capability, resilience or productivity required. RIIO-T3 demands a more strategic, intelligence-led, and proactive supply chain approach – one that anticipates scarcity, shapes markets, builds long-term capacity, mitigates systematic risk and moves beyond project-by-project procurement toward long-term capacity orchestration.

      How can TOs scale and unlock ecosystem-wide capacity to meet demand without sacrificing efficiency?

      TOs are already signalling that a different model is required. Four transitions are now unavoidable.

      The supply chain can no longer operate as a transactional function focused on competitive sourcing and cost control. In a globally constrained market, the primary risk is no longer overpayment or securing the right quality—it is failing to secure manufacturing slots, engineering capability or installation resource at all.

      TOs need to be strategic, active, and intentional in shaping market, building capacity and orchestrating the ecosystem ahead of need. This requires four deliberate interventions:

      • A committed long‑term pipeline:

        In a high‑demand, supplier‑led market, TOs must make themselves attractive partners by offering credible, visible and bankable workload over time. Committing to a multi‑year pipeline will give suppliers the confidence to invest in the people, plant and production lines needed to expand capacity. Advanced procurement mechanisms — such as multi‑project frameworks, equipment frameworks and long‑term volume commitments — amplify this signal by reducing uncertainty, de‑risking investment decisions and providing the stability suppliers require. 

      • Supplier market engagement:

        Driven by a clear market management strategy, integrated pipeline visibility, and open dialogue with suppliers. Continuous feedback loops allow strategy, risk and capacity requirements to be transparently aligned long before contracts are let.

      • New delivery models:

        Including dynamic Tier 1 collaboration frameworks, self‑delivery approaches and strategic partnerships with critical Tier 2 and 3 suppliers. These models enable capacity creation, strengthen supplier capability and support long‑term market development.

      • Collaborative commercial models:

        Commercial models must align incentives to desired outcomes, reflect real market conditions and be genuinely attractive to suppliers operating in a high‑demand global market. Effective models require a deep understanding of suppliers’ risk appetite and how risk is best allocated. This includes clarity on profit limits, cost exposure, liability caps, inflation and the extent of design risk transfer. Well‑structured commercial models distribute risk appropriately, reward performance fairly, and create the confidence suppliers need to scale capacity, innovate and invest.

      RIIO‑T3 therefore calls for a supply chain function that is market‑shaping, forward‑committing and capacity‑securing—the cornerstone of reliable delivery in an environment where ecosystem constraints, not funding, define the limits of the programme.

      The second shift follows logically: from managing projects individually to orchestrating programmes collectively.

      Under RIIO-T3, concurrency becomes the defining feature. Multiple major schemes run in parallel, drawing on overlapping supplier pools and skill sets.

      Portfolio procurement smooths workloads, reduces cyclical demand spikes, allows strategic prioritisation of scarce capability and enables economies of scale. It also reduces duplicated tender effort and improves standardisation opportunities across projects.

      This must extend beyond contracting structures to include: regional and national logistics strategies; portfolio‑level supply chain intelligence to manage risks; capacity analytics to smooth schedule peaks; integrated pipeline planning; and credible demand forecasting that gives suppliers the confidence to invest.

      At RIIO-T3 scale, value is created by managing interfaces across the portfolio, not just within individual projects.

      Regulatory scrutiny on cost and productivity will intensify under RIIO-T3. But efficiency in a constrained market cannot be delivered solely through competitive tender.

      True productivity gains will come from industrialisation which is made possible through portfolio delivery.

      Meeting RIIO‑T3 volumes requires shifting from bespoke engineering to repeatable, modular and standardised solutions wherever feasible. This means embedding a programmatic delivery model built on:

      • Standardised high‑risk systems and components

        to enable offsite development and reduced variability.

      • Common component strategies

        and new buying routes for critical, high‑volume items.

      • Prototyping and design‑for‑manufacture approaches

        to validate solutions early and drive programme‑wide repeatability.

      • Modularisation and increased factory assembly

        to reduce onsite labour demand.

      • Data transparency and digital integration across design, construction and commissioning

        to unlock productivity.

      • Early supplier involvement

        to optimise manufacturability from the outset.

      • Skills and workforce strategy

        aligned to offsite delivery model and including manufacturing skills, digital skills, integration skills

      The productivity frontier in RIIO-T3 will likely be defined by how far TOs can industrialise infrastructure that has historically been customised. Efficiency becomes a function of repeatability, not simply competitive tension.

      This represents a significant shift in mindset, culture, organisational design, and commercial and contracting approaches: moving from delivering one‑off projects to producing infrastructure through semi‑industrialised processes.

      To succeed, TOs must operate as intelligent clients—able to maximise value from the supply chain and position themselves as attractive, capable partners, and a continuous improvement loop to standardise what works and refine approach over time.

      Manufacturing constraints are only one part of the equation. Workforce capacity is equally material.

      Across the energy sector, workforce modelling indicates 400,000 additional energy sector roles could be required by 2030⁴. This scale of expansion cannot be achieved through transactional contracting alone.

      Workforce, training and regional supply chain capability become strategic levers.

      This reframes supply chain resilience from diversification alone to ecosystem development:

      • Long-term skills pipelines and apprenticeships
      • Strong supplier relationship management, including real time data on supplier performance, capacity and risks
      • Partnerships with training providers
      • Engagement with international suppliers to boost UK capacity
      • Regional economic engagement
      • Credible, multi-year workload visibility

      In this model, the TOs are not simply a client procuring a service. They become a coordinator of industrial capacity, aligning multiple actors toward shared delivery outcomes.

      At a portfolio level (and even for major programmes), the TOs should be aiming for long term sustainable partnerships with the supply chain where it is mutually beneficial to drive value and performance.

      The Regulatory Tension: Value for Money Demonstration

      These shifts are not without tension. On the one hand, Ofgem expects demonstrable efficiency and cost control. On the other, securing long-lead capacity and entering long-term strategic frameworks may require marginal overpayment, at least in the short term.

      This sets a critical strategic question on how to demonstrate value for money (VfM) when suppliers prices reflect structural scarcity rather than inefficiency.

      The answer lies in reframing VfM with productivity measures. In the current supply chain environment, efficiency cannot be assessed purely through input cost benchmarking. It must account for: schedule certainty; avoided delay costs; portfolio optimisation and risk reduction; and long-term capacity creation.

      In other words, efficiency must be evaluated in terms of delivery reliability and total system value, not simply lowest tender price.

      Starting Strong: First Steps for RIIO‑T3 Market Shaping

      The scale of change under RIIO‑T3 can feel overwhelming, but the starting point is simple: build clarity before capability.

      TOs need a single, integrated view of future demand, supplier capacity, and market constraints — a baseline that reveals where early intervention will matter most. From there, the first moves should be targeted and deliberate: establish pipeline visibility, engage key suppliers early, and define the priority markets where shaping, not sourcing, will determine success.

      The organisations that begin with this foundation — and act now to shape markets rather than react to them — will be the ones that respond to the supply paradigm by securing capacity, unlocking productivity, and setting the delivery model for the next generation of UK infrastructure.

      Contact us to discuss how we can partner with you to design supply chain and market‑shaping solutions that unlock capacity and drive productivity gains.

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