In our last two articles, we set out that demand for UK energy infrastructure is structural and largely independent of the economic cycle. But for those who work in – or with – the businesses that build and maintain our electricity networks in the UK, cyclicality is an all too familiar notion. For suppliers into the UK network, the exposure is to regulatory procurement cycles.
The electricity network is run by locally appointed Distribution Network Operators (DNOs), carrying power from the national grid to homes and businesses. DNOs buy in waves, set by Ofgem's five-year funding cycle, known as RIIO. The current period, ED2, runs to March 2028. The next, ED3, runs from April 2028 to March 2033. Understanding – and underwriting - those buying cycles is central to how we invest in the sector.
The step-change
ED3 is expected to bring a significant step-up in distribution investment, quadrupling RIIO-ED2’s £20bn (2023–2028) to £80bn from 2028–2033. Three things are driving it: the need to replace ageing infrastructure – with the average UK transformer now 63 years old against a useful life of 37; the UK’s electrification targets and electricity demand forecasts; and the wider push for energy security and clean power.
Ofgem's framework for ED3 also moves away from ED2's "flex first" approach, which encouraged smarter usage management of the existing network over new investment in network infrastructure. This was to prevent over-investment in electricity capacity that was not needed. Now, DNOs are pointed towards balancing flexibility and building some capacity ahead of need where there is sufficient evidence to support investment. Essentially, it means new investment is a more central theme of the DNOs' business plans for ED3 versus ED2. Replacement, upgrade and new-connection work should therefore all peak in the same period. On paper, that is a strong backdrop for suppliers. In practice, the burden is incumbent on suppliers to scale up in advance of the DNOs' business plans if they want to be part of delivering them – and part of the high-growth period that ED3 should bring.
Why timing is the risk we price
DNOs have a long habit of slowing their ordering at the start of each price control period while funding is being finalised. They then accelerate sharply once Ofgem publishes its final decision, known as the "final determination". This creates an order slowdown dynamic for suppliers at the beginning of each regulatory cycle. For years, manufacturers have been telling the regulator they want funding that runs across price-control boundaries and an end to stop-start ordering. This would provide better visibility of future income so that suppliers can make the investment decisions they need around future demand for their products.
Ofgem has confirmed this need. Responses to its 2026 call for evidence on network supply chains named credible demand visibility and the treatment of investment risk as the persistent barriers to new manufacturing capacity. The regulator's response, set out in September, is procurement guidance and new reporting requirements. How networks are funded stays as it is, so in ED3 the timing risk stays with suppliers.
So, when we look at a grid-enabling business, the question we look to answer is how management can maintain robust trading and growth despite the periods of regulatory slowdown inherent in the sector.
What we are seeing at Winder Power
Winder Power, the Leeds-based transformer manufacturer we backed through a management buyout in 2024, shows how a well-positioned business handles that risk. It holds supply frameworks with most of the UK's DNOs and is performing strongly: it has more than doubled EBITDA in two years and was named Medium category winner for Yorkshire and the North East at the UK Private Capital Vision 2026 Awards, where judges described it as an exceptional example of a Yorkshire-based manufacturing business.
Winder is structured to be working capital neutral across the production cycle. That has allowed it to fund its growth, including a multi-million-pound upgrade of its Leeds factory, without taking on any long term debt. This investment means Winder can now design, build and test 132kV power transformers in Leeds, and its first 132/33kV unit completed factory testing in September 2026.
Winder is also building an order book that is less tied to the regulatory cycle. A growing share of its orders now comes from Independent Connection Providers (ICPs) and grid-scale customers connecting solar, battery storage, data centres and industrial sites. For these customers, work follows private investment timetables rather than Ofgem's calendar. Alongside this, its dedicated Transformer Services division has recently expanded into a new site, adding refurbishment work on an ageing installed base. Demand in all of these markets remains strong.
We are proud to back Winder through this expansion: a business positioned to capture the ED3 upswing.
Why this matters beyond one business
SMEs hold much of the specialist manufacturing and engineering capability behind the grid. They are also the least able to absorb stop-start demand. New capacity, whether a production line, more engineers or a bigger site, has to be committed well ahead of the orders it expects to deliver. Ordering goes quiet at the start of a price control, making the investment case more challenging, however certain the eventual work. For businesses without inherent robustness or the know-how to build it into their business, the result is a supply chain that consistently under-invests relative to need.
The industry does recognise this. The Electricity Networks Sector Growth Plan, the first joint plan from network operators and their suppliers, brings together more than 80 companies through the Energy Networks Association and BEAMA. It makes better visibility of future opportunities a core priority, and its interim report calls on Ofgem and the government to create regulatory frameworks that enable long-term investment and provide the right incentives to support the supply chain.
The government's announcement of Great British Grid, a new publicly owned body to invest in network infrastructure, signals that more capital is coming. How directly it reaches the distribution supply chain is not yet clear, but in our view the shape of that capital will matter more than its sise. Suppliers need firm forward commitments and visible volumes across price-control boundaries. Capacity should be built steadily and intentionally, by giving SMEs confidence in exactly how they can support the UK’s electricity networks to scale up. Ambiguity means that only the players who can absorb the wait will be ready to support – and benefit from – the scale-up.
Diversification is the defence
Grid demand splits into three core needs: replacing ageing assets, upgrading existing ones and connecting new capacity. On the public network, all three depend on DNO spending. A supplier selling only into DNO frameworks is exposed to the price-control cycle whatever mix of work it does, because replacement and refurbishment need regulatory funding just as new connections do. Defence is a broader customer base.
Independent Connection Providers and private customers offer breadth. Solar and wind farms, battery storage, data centres and large industrial sites all need transformers, switchgear and connections, and they buy on their own investment timetables, set by planning consents, grid offers and funding, rather than by Ofgem's calendar. Their demand is not wholly independent of the network, since connection offers still depend on grid capacity, but it moves to a different rhythm. For a well-run SME, a meaningful share of private-sector work keeps revenue coming and skilled teams together while DNO ordering is quiet, without giving up the framework positions that will matter when ED3 orders arrive. A business with both is far better placed to trade through the regulatory procurement cycles inherent in the sector.
How it shapes our appraisal
Procurement-cycle risk is therefore a standing item in our diligence. We look at how exposed a business is to the DNO framework cycle and what else it can lean on if that cycle pauses. We also look at the customer mix: how much of the order book comes from ICPs and private developers buying on their own timetables.
Our understanding of the cycle comes from inside our own portfolio. Backing Winder has shown us first-hand how the regulatory calendar feeds through to orders, cash and capacity decisions, and that shapes how we work with management teams. Some of our key focus points have been: widening the customer base beyond the DNO frameworks to ICPs and private developers; keeping tight control of cash on every project; and timing capacity investment to demand that is visible.
What we are watching next
Three things will shape the next few years. The first is how DNOs manage ordering ahead of the ED3 final determination. The second is whether Ofgem delivers the pipeline visibility the supply chain has asked for, with its consultation on network procurement guidance expected this autumn. The third is whether the actions in the Sector Growth Plan turn into firm, visible order pipelines. The operators disciplined enough to manage through the trough will benefit the most.
Our conviction in grid-enabling infrastructure is high. Demand is structural and non-discretionary, and supply is constrained. Businesses with framework accreditation and real manufacturing capability sit behind high barriers to entry. Our edge is understanding the buying cycle beneath that demand and backing management teams to trade through it.
Connection Capital invests £3–12m of equity into established, high-quality UK businesses, including grid-enabling companies exposed to the electrification of the UK network. If you are a founder, management team or adviser in this space and want a backer who understands both the opportunity and the cycle behind it, we would like to hear from you.