Ofgem reported 732 GW of projects in the grid connection queue in November 2024, across all technology types. This means the queue has almost twice the installed capacity required in Great Britain by 2050, based on the Future Energy Scenarios (FES) 2024 Holistic Transition Pathway.
On November 5th, 2024, NESO released its latest framework for grid connections reform (TMO4+). The new TMO4+ proposals move from the “first ready, first connected” approach presented earlier this year to a “first ready and needed, first connected” approach. The major change is the inclusion of alignment with the UK Government’s Clean Power 2030 (CP30) targets.
The latest reform work aims to reduce the grid connection queue further and accelerate the connection date for projects that meet certain criteria.
The opportunity for stakeholders to provide feedback on NESO’s latest round of consultations closes on Monday December 2nd at 5pm. This article outlines the main design details of NESO’s proposed reform work and highlights some topics significant to BESS development.
As these proposals are under consultation and require a decision from Ofgem, they could still be changed.
144 GW of battery projects have grid connection dates by 2038 in the transmission queue
When electricity generation, storage, and demand projects want to join the electricity grid in Great Britain, they need to obtain a grid connection. This is a physical connection that allows them to import and export electricity to and from the grid.
The connection queue is an aggregation of the transmission register and registers from the six Distribution Network Operators (DNOs) in Great Britain.
While some work has been done to reduce the existing queue, 61 GW of battery projects have connection dates to 2030 in the transmission connection queue alone. This represents over twice the 27 GW needed by 2030 based on the CP30 Further Flex & Renewables Pathway.
The current queue process works on a “first-come, first-served” basis. Grid connection dates are given relative to an application's timing. Essentially, a project’s position in the queue and, therefore, connection date are given based on when its application was submitted.
This means some projects may be ready to connect years before their connection date. Meanwhile, other projects could have connection dates they are not ready to meet. In addition, some projects are speculative and may never come to fruition.
NESO’s proposed reforms aim to create a more efficient process. Projects will secure their place in the queue on a “first ready and needed, first connected” basis.
All projects will need to pass a Gate 2 assessment to receive a firm grid connection date
NESO’s latest proposals introduce a bi-annual application window combined with Gate 1 and Gate 2. At Gate 1, developers can assess the feasibility of their projects and receive an indicative grid connection date and connection point. An application for a Gate 1 offer will be optional for new projects.
Gate 2 is where projects receive a firm connection date and connection point. NESO will conduct Gate 2 assessments on the current queue in a one-off exercise called “Gate 2 to Whole Queue”. Within this process, projects can request advancement to an earlier connection date.
At Gate 2, NESO will assess projects for their ‘readiness’ and ‘strategic alignment’:
- The ‘readiness’ component of Gate 2 is demonstrated by possessing relevant land requirements or planning approval.
- ‘Strategic alignment’ is assessed on whether the project is a ‘designated project’, aligns with the CP30 plan, or is a transmission-connected demand project that is not in the scope of CP30.
Sub-queues based on the Clean Power 2030 pathways are formed at Gate 2
The CP30 plan will set out two pathways, now - 2030 and 2031 - 2035. This will specify the capacity and locational requirements for different technologies to achieve the clean power target by 2030 and the longer-term objectives by 2035. The CP30 plan is due from the Department for Energy Security and Net Zero (DESNZ) before the end of the year.
The Projects that meet the ‘readiness’ and ‘strategic alignment’ criteria are then aligned with the 2030 and 2035 pathways.
- Phase 1 (2030 Pathway): Projects that align with the 2030 pathway and can connect by 2030, including those that request advancement to 2030 or earlier, are placed in Phase 1.
- Phase 2 (2035 Pathway): The remaining projects, aligning with the 2035 pathway and able to connect by 2035, form Phase 2. This pathway is also expected to align with the Holistic Transition scenario of the Future Energy Scenarios 2024 and the future Strategic Spatial Energy Plan (SSEP), which is expected in 2026.
The SSEP will provide a longer-term framework for energy infrastructure development beyond 2030.
At Gate 2, NESO will organize projects into zonal sub-queues (sometimes called pots) based on their technology type and the locational zone they are connecting to. Zones are also dependent on whether a system is transmission or distribution-connected. In NESO’s modelling, the zones for distribution-connected projects align with the 14 Distribution Network Operator (DNO) zones. NESO outlined 17 zones for transmission-connected sites. These zones could be subject to change under the CP30 Plan.
Within each zonal sub-queue, NESO can further prioritize projects based on their planning status. Projects that have obtained planning permission would be prioritized over those with planning applications submitted or those relying solely on secured land rights.
Designated projects are also given priority within the pathways.
Strategic alignment may not guarantee a firm grid connection date
Demonstrating ‘readiness’ and ‘strategic alignment’ may not guarantee an accelerated or firm connection date.
If a pot exceeds its capacity, the ‘oversupplied’ projects could receive connection dates in a different pathway, e.g. moving from the 2030 pathway to the 2035 pathway.
Updates to the pathways following the release of SSEP could also result in projects being removed from the queue completely.
On the other hand, a specific technology in a particular zone could have insufficient capacity to meet the pathway requirements. In this situation, projects meeting this undersupply in future application windows can fulfil this capacity. Alternatively, NESO has also suggested meeting undersupply with oversupply in adjoining zones, but only in certain circumstances.
Failure to pass the Gate 2 assessment can mean removal from the queue for existing projects
Projects that fail to demonstrate compliance with the Gate 2 Criteria for ‘readiness’ and ‘strategic alignment’ during the "Gate 2 to the Whole Queue" process will receive a Gate 1 offer with an indicative connection point and connection date.
Projects removed from the queue can reapply in future Gate 2 application windows. They would then be assessed alongside new applications, and their queue position would be determined around this.
Projects in the queue are subject to ongoing compliance with Queue Management Milestones, and failure to meet these milestones can result in their removal from the queue.
Project developers could be required to pay a £20k/MW commitment fee to secure their grid connection
NESO has also proposed introducing a financial instrument for projects passing Gate 2. This would be a Capacity Commitment Fee (CCF) of £20,000/MW. Its primary objective is to discourage speculative applications and ensure that connection capacity is allocated to projects committed to development.
Developers would be required to pay the fee as a security - the Capacity Commitment Fee Security (CCFS) - between accepting the Gate 2 contract offer and achieving Milestone 7: Project Commitment. This milestone typically involves financial close and the start of construction.
The CCFS would be refunded upon completing Milestone 7 but becomes payable if the developer terminates their connection agreement or reduces their contracted capacity before reaching Milestone 7.
The total payable security will account for existing fees
Developers already pay a Cancellation Charge Secured Amount (CCSA). This means the total securities to pay is CCFS + CCSA. However, if the CCSA is equal to or greater than the CCFS, then the CCFS is equal to £0. Therefore, the total would always be at least £20k/MW.
While the fee is refunded upon completion of Milestone 7, it still poses a significant additional cost to developers, representing a 39% increase in grid connection costs. The timescales between Gate 2 acceptance and Milestone 7 completion could be years. Some developers may not be able to absorb this cost during this time.
Consultation on the proposal closed on November 22nd 2024 but more details on the instrument can be found on the NESO connections reform portal. The methodology for determining the fee can also be found in the Transmission Charging Methodologies Forum (TCMF) slide pack from October 11th 2024.
Grid connection reform brings long-term efficiency but short-term uncertainty
The current consultation round will close at 5pm on December 2nd 2024. Following this Ofgem is expected to make a decision on the proposed methodologies and license changes by the end of Q1 2025.
The “Gate 2 to Whole Queue” exercise will begin shortly after that, with an expectation of issuing updated connection date offers by the end of 2025. This means that it could be a year before project developers receive a firm connection date.
NESO has stated that it will ensure that projects that have met the Gate 2 criteria are already under construction and are due to commission in 2026 or earlier “will not be adversely impacted by aligning the queue to the CP30 Plan.”
Several consultations are taking place on connections reform work - the methodology proposals, code updates and the financial instrument. In addition, there are other consultations related to system and market design.
Under the current proposal, connections reform relies heavily on CP30. DESNZ is due to finalize the CP30 plan in Q4 2024. Any delays here could delay the connections reform.
The government’s decision on Ofgem’s proposed Cap & Floor scheme for Long Duration Electricity Storage (LDES) is also due by the end of winter 2024/25. LDES is a separate category from batteries in CP30 and could impact project classification and investor and developer decision-making.
Connection queue delays have also been attributed to the delays in battery buildout. Over 1 GW of battery capacity with agreements starting in delivery year 2024/25 still remain to come online. 14 GW of new-build projects have agreements starting now to 2027. The proposed methodology has provided limited insight into its interaction with Capacity Market agreements.
Stakeholder input will guide decision-making
NESO seeks to take a holistic view when operating the system. Within the connections reform work, much of the decision making will be at NESO’s discretion, with consideration for the whole system and future needs.
In general, the proposed reforms should lead to a more efficient system. However, it also means the market has less certainty and control, and in the transition period, much uncertainty remains. In this case, participation in such consultations is crucial to ensure stakeholder views are considered.
Thank you to Yasmin Kasri from CMS and Georgina Morris-Rowbottom from Zenobe for their support on this article.