Grid connection reform with Ed Birkett ( Director of New Project Development @ Low Carbon)

We already run the CFD auctions once a year. They take about six months from start to finish. We see no reason why you couldn't just have a continuous process where as soon as one ends, the next one begins, and that maybe would strike a balance that the government would be comfortable with between getting the volume through and also keeping the prices low for consumers.

Can we talk about the cost element of this? This is massive infrastructure. This is billions, potentially trillions globally or certainly trillions globally going into these projects. We are entirely replacing and upgrading electricity system.

The grid connection application fees are in the tens of thousands.

Securing the land will cost you in the hundreds of thousands, and submitting the planning application will cost you in the millions. And building the project will cost you in the hundreds of millions. The policy on strategic spatial energy planning is not currently well developed within the government, and that needs to be developed in the context of the government's new clean power mission. Connection's queue as of June is around seven hundred gigawatts. I think the figure is that we're not gonna need more than two hundred of that, or we need rules that require developers to progress or to get out of the queue.

Welcome back to Transmission. Today, we're back with another installment of our mini series exploring the challenges facing the new government. In this episode, Ed Porter is joined by Ed Birkett, new project director for the UK development team at Low Carbon. Over the conversation, Ed discusses the current challenges with grid connections, how changes in the contracts for different auctions could help us reach net zero targets, and the current state of the grid connection queue and what could be done to improve the system. As always, if you're enjoying the podcast, please hit subscribe so you never miss an episode. And don't forget to give us a rating wherever you listen. Let's jump in.

Hello, and welcome to another episode of Transmission.

Very excited today to be joined by Ed Birkett from Low Carbon. Welcome, Ed.

Hi, Ed. Thanks for having me.

Very good. I can see that can be quite confusing for our for our listeners. So today, we are going to do another podcast in our miniseries going through some of the challenges that exist for the Labour government, but hopefully digging into some of the kind of practicalities of how they might be able to achieve some of the goals that they have around doubling, tripling, and quadrupling various forms of renewables in the space.

So without any kind of further ado, it would be great to get a bit more context on yourself and also low carbon.

Great. So thanks thanks, Javier. So I'm Ed Birkett. I'm a director in Low Carbon's UK development team, and I focus on all things grid in the preconstruction phase. And then I have a separate team led by a colleague of mine that takes the the grid connections through the delivery phase and and into operations.

Low carbon is an independent power producer, heritage in the UK primarily on the development side, particularly in the first round of solar from about twenty eleven to twenty sixteen.

We did some batteries as well in the period about twenty fifteen to twenty nineteen, standalone batteries, including in the EFR, enhanced frequency response Those were original auctions.

Vitol Vitol low carbon. Right? VLC?

Yes. So there was a joint venture there Okay. To fund the construction of of those batteries. And then subsequently, low carbon has has really expanded now into different geographies and also into different parts of the development cycle. So we're now involved in building, owning, and operating assets as well as developing them.

Okay. And you've recently been in the news as well with some large solar sites coming through?

Yes. So since so in the last five years, Low Carbon has consented as a chief planning consent for around one point six gigawatts of solar projects in the UK, and of that, about five hundred now of those are either operating or under construction.

And then we had the really good news a few weeks ago that the new Secretary of State, Ed Miliband approved, a development consent order, so the planning commission for a five hundred megawatt solar farm that we've been developing in Lincolnshire, and that's the Gate Burton Energy Park. And so there are six of those now that have been approved, with three of them being approved a few weeks ago. So, yeah, that that's gonna make a major contribution towards the government's energy targets, and hopefully should be online within the next five years, depending on amongst other things whether the grid connection date can be brought forward now for that consented project that's ready to go.

Okay. And that and just kind of to put some context on that, so just how stuck was that was that project?

So I think the Gate Burst Energy Park project was quite lucky in terms of when it came through the the consenting regime in that it the the actual final decision from the Secretary of State didn't get delayed that far. Perhaps it got pushed back a couple of times. But just for other people's context, the secretary of state is the decision maker in terms of granting the planning commission for schemes that are greater than fifty megawatts, which go through the development consent order regime as because they're designated as nationally significant infrastructure projects.

And that nationally significant process is is a bit different to what you would have normally where you where you put your project and it goes to the council and then the or the local authority and the local authority decides. It has that that political decision maker, and that means it can be more you know, those decisions can get held up, for example, by things like elections, and also the Secretary of State has the right to push back those decisions. We were quite lucky, really. We probably only got pushed back a few months, but there were other projects that had been pushed back repeatedly and that were then granted permission when the new government came in very swiftly. What we wanna see going forward is that as projects get through the system and through that that, you know, quite onerous planning system in terms of the nationally significant infrastructure projects, we wanna see them then having a swift decision from the secretary of state, so that we can get on and build them.

And And I suppose the other part of this is, as you say, once you've then got that decision, you mentioned five years for that project to come through. That that feels kind of odd in some ways in that a lot of the reports we've seen in the marketplace say, well, they're potentially something like two terawatts of of solar panels that might be manufactured, maybe not deployed, but maybe manufactured over the next year. It feels like we've got solar panels everywhere. How come it's gonna take five years to to come into action?

Yeah. I mean, so that so so these projects do take a long time to build. They are very, very big projects, and they do require equipment that is on quite long lead times. The solar panels are probably not the long lead time item right now, particularly given the state of the panel manufacturing market, but things like ordering supergrid transformers.

So these sites will require four they're four hundred kV connections, so connected directly to the transmission network, and that requires high voltage cabling. It requires these supergrid transformers. And a lot of these now are on very long lead times, maybe maybe even three years. So even without the the grid connection delays, it might take two or three years to get these projects connected after the point where you've, been given planning consent.

But now you've got the grid connection delays as well. And what we're hoping is that through the connection reforms, those projects that are ready can get connected.

One other thing I'd highlight as well is the the contracts for difference auctions.

So in the UK, the vast majority of renewable energy projects that are brought into operation do have a fifteen year CFD contract with the government, and those auctions are only run annually.

So the earliest opportunity for a project that was consented recently, like Gate Burst and Energy Park, to receive a CFD is q four twenty twenty five. So we think there's a case of the government to look at running those CFD auctions twice a year. You know, the government has very ambitious targets for what it wants to achieve by twenty thirty. And if you were to bring those CFD auctions and make them twice a year, then that would just allow a lot more projects to come through the system and a lot more projects to get built more quickly.

Yeah. We had, Merlin on, a few weeks ago, and he was suggesting that the auctions are great for price discovery, but much like you can buy anything off Amazon maybe, having, like, a buy it now price. So if you're in between auctions, then potentially the ability to bring forward projects at a certain price might get more volume through, potentially an interesting idea perhaps similar to your sort of two auctions per year structure.

Yeah. I mean, I think, you know, as as developers, you always would like the option to get a guaranteed price and go whenever you whenever you're ready. You know, balanced against that is the value for money consideration.

We already run the CFD auctions once a year. They take about six months from start to finish. We see no reason why you couldn't just have a continuous process where as soon as one ends, the next one begins And that maybe would strike a balance that the government would be comfortable with between getting the volume through and also keeping the prices low for consumers.

Okay. And and one thing you mentioned in there is kind of the the super grid transformers. And I think maybe for energy folk, they they tend to be the the thing that you sometimes see a picture of. More or less everything else that goes onto a site generally fits into a container, and so it goes in sort of nice containers, arrives at site, and someone unpacks it and installs it.

But the super good transformers, they're often generally quite bulky pieces of kit, and so you generally see them on a barge or being being lifted in somewhere. So always a good photo. So when you do get them on-site, definitely take a photo, get that sent around. We'll make sure we share it from the motor side too.

And maybe just a a strategy a a kind of strategy question. Right? So Gate Burton five hundred megawatts, is that very much where the market's going? So, yeah, do do you want to kind of make sure that all of your projects are in that site, that that type of scale in terms of UK and also abroad, or are you kind of looking at a range of sites down to, like, the ten, twenty megawatts?

So there are definitely some economies of scale as as you get into these bigger projects, particularly around the installation of the actual solar farm itself. But in a way, there are, you know, there is a certain these these are modular systems, so there is a certain point beyond which you don't get that much further reduction.

Really, there's a couple of things that have been driving the sizes of projects. One of them is the planning, regime. So you have to stay below fifty megawatts if you want to go through the local authority system, Town and Country Planning Act, or if you're over fifty megawatts, you're into the national planning system for the nationally significant infrastructure projects or the or the DCOs.

Now that is that DCO process is quite onerous, and so if you're gonna go through that, you wanna go big.

But also you have to look at the grid connections as well and the different voltages. So if you have a connection at thirty three kV, on the distribution network, then actually a project that's twenty to thirty megawatts is is very appropriate, and that can be a very affordable connection.

Then you get into the one three two kV connections on the distribution network.

Perhaps those could be up to a hundred megawatts, but but because of the planning system, they tend to be fifty megawatts each. So the government's looking at raising the threshold in the planning system from fifty megawatts to a hundred or a hundred and fifty. That would be particularly helpful for those one three two kV connections to the distribution network and make more efficient use of the the limited network, infrastructure that we have. Once you're into four hundred kV connections though, you really want to be you know, these are expensive connections. You really want to be maxing them out, and five hundred megawatts is a is a reasonable size for that. Mhmm.

You know, perhaps there will be some limitations in how big you can go.

You know, these are these are big projects, and we're conscious that we don't wanna be, you know, proposing projects that that that are too big for the for the area that we're proposing them.

And I suppose going going back in time a little bit, the kind of when you approached grids maybe ten years ago, there was a bit more capacity on grid. And so maybe you might have been able to find some capacity at an existing super grid transformer. Whereas nowadays, as you say, like, the the solar part that you're building is gonna require a brand new transformer. And so you don't wanna be the person paying for or paying for that transformer and then are you only using a small portion of it. Is that is that kind of how you think about it in the commercial side?

Yeah. So there is a there is a structural point as well that the grid is increasingly full.

Low carbon really got going again on solar in twenty eighteen for this round of solar, and that meant that we could go to the network companies and there was a lot of capacity available. So we were able to get that. The projects that we're commissioning now are generally projects where we got secured the grid connection capacity in maybe twenty nineteen, maybe twenty twenty, and that those grid offers didn't have particularly bad network constraints on the distribution network and, crucially, not particularly bad constraints on the transmission network as well because you can only connect when both the distribution network and the transmission network are able to accommodate your connection.

As you go as you fast forward now, the distribution networks really are full with the current size of the connections queue. And so that means, you know, structurally, seeking many more additional distribution network connections is is a diminishing returns. Mhmm. And so developers have really been pushed towards seeking connections at the transmission network level where you can get those bigger connections, which, you know, perhaps offers some economies of scale, but it also means you can bypass a lot of the the local network constraints on the distribution network, which are now holding back schemes.

Mhmm. And we're we're there. Right? We're we're at that point of the conversation where we have to talk about the connection queue. How bad is this? How limiting is it for solar developers?

So I think it's a problem for all developers, developers of all all technologies.

We are Locarbon is a big developer, so we have projects that are the whole way up and down the connections queue from connecting almost today to connection dates in the late twenty thirties, twenty thirty seven, twenty thirty eight. And, you know, that is very challenging because it because, you know, it's challenging to invest in a project when the connection date is a long way away because, ultimately, you just you just don't know how quickly it's gonna get brought forward and, therefore, when you may or may not be able to get a return on your investment.

Can we can we talk about that bringing forward? So the date that you mentioned twenty thirty seven is a date that many people will be familiar with because it's almost like a long stop date that people kind of see. Yes. When when when you say stuff gets brought forward, what does that what does that mean?

Yeah. So so that twenty thirty seven date is essentially saying whatever network assets are required, they can be built by twenty thirty seven because it takes thirteen or fourteen years for, the transmission companies to build whatever those assets are. And, you know, we think there is substantial ability to bring projects forward. We would hope that that a lot of those projects can be brought forward towards twenty thirty Mhmm.

And perhaps slightly after, and that would align with a lot of the new government's targets. But that is gonna require a thinning out of the queue and prioritizing those viable projects that are actually making sustained and serious progress towards energization, and that's just not the way the grid queue rules have worked at the moment. The grid queue rules at the moment mean that almost anyone can turn up, secure many gigawatts of capacity, and do nothing for years, and and see if they can maybe sell those grid offers to someone, or just just sit on them, and then maybe come back later. And

and that that type of capacity hoarding is a real problem, and the new grid code rules, the grid queue rules that the ESO is proposing will go a long way to thinning out the connections queue.

And just to give some context to that, how big is the connection queue at the moment?

So the connections queue as of June is around seven hundred gigawatts of projects across transmission and distribution.

I think the figure is that we're not gonna need more than two hundred of that across all different technologies in the long term, so, you know, potentially out to twenty fifty. So we are now in a point where if all projects did progress, then a lot of those projects at the back of the queue are not needed. Mhmm.

Our view is that there are a lot of projects that are in the queue that are not progressing and are not developable.

So, you know, maybe you've got a solar farm that's in a a hilly or even mountainous region. That project is very unlikely to progress, and therefore, we need rules that require developers to progress or to get out of the queue. Then we'll see whether or not that solar farm in that hilly or mountainous area will be developed. We think it won't be, and then it would drop out the queue and allow other developers the chance to to progress.

And just to kind of put a put some numbers on that. So if you get a project accelerated, what does that look like? Does it get accelerated by a year, ten years? What what does that process look like?

So we don't know at the moment. There are different initiatives on the distribution network and on the transmission network. On the distribution network, there's been a big focus on what's called the technical limits initiative, and the idea there is that the key constraint point is that the interface substations between the transmission network and the distribution network, those are the grid supply points or the GSPs.

And what the model that we're moving to now is that projects can connect to the distribution network, but they will be turned down or turned off at points where that interface would be overloaded. And we've seen projects accelerated already by six or seven years under that under that system. So instead of a twenty thirty two connection, we can connect as soon as we're ready, which might take a couple of years to build the project. And in return, we suffer temporary risk of curtailment, which is being turned down or switched off until that twenty thirty two date.

And that that curtailment is kind of is really interesting. Right? So, yes, everyone would love to generate and have a a firm grid connection, so something that's not curtailed.

When you do get curtailed, I think for many of our listeners, they'll be storage people, and they will think, this is kind of an interesting opportunity. So a solar farm that gets curtailed just needs to turn down. A plant that is, say, solar and storage, there could be an opportunity there in terms of in terms of how to manage some of that curtailment. Is that is that kind of in in low carbon's portfolio?

Yes. There there there are absolutely opportunities to have storage alongside your solar. We've done that on a number of our plants already.

And, you know, where possible, we will do that going forward.

Part of the problem is that at the moment, when you include a a battery project on your on your solar farm, the grid operator will see that battery and treat it as if it's gonna make the local curtailment or congestion of the network worse rather than better. I have some sympathy with the with the network operators on that, particularly on the distribution network because the distribution network operators don't have the same visibility and controllability of assets like what you have at the transmission network through the balancing mechanism.

Yes.

So we actually think that's something that Ofgem needs to look at and looks needs to explore whether we should have some regional balancing mechanisms, for each of the distribution network operators. And that would be a way of running the distribution network hotter because the the DNO now has more visibility and more controllability of those assets, and therefore, the batteries can actually help the system rather than potentially causing it to fall over.

Yeah.

And when you say run the DNO network hotter, what do you mean?

Connect more projects for the for a given level of network capacity. So, for example, if you had a solar farm and a battery on the same line, at the moment, the the DNO might think, well, the solar farm and the battery might both export at the same time, which is the worst case that they have to model. Whereas if you could have this regional balancing mechanism that would ensure or offer the battery when the solar is generating to say, actually, do you want to charge cheaply? And this is the way that we're gonna resolve this network constraint.

Mhmm. It's a bit of a it's a it's a kind of a it's a funny one. Right? So when we've looked at colocation, we see how much storage works around, say, solar's profile or wind's profile.

Actually, the the two techs very, very rarely will be trying to do the same thing at the same time in terms of exporting. As you say, with things like the balancing mechanism, there's maybe a little bit more of a reason where there might be some technical thing that the battery is being used to respond to, in in which case they might want to share the connection. But, really, they kind of overlap in in such a limited way because of how the market is designed. So when you have lots of solar, you have lots of wind, generally speaking, the price is very low, and no battery wants to be exporting in low price because they're all running, a merchant trading strategy.

So all all kind of everything makes sense, which is which is nice.

Yeah.

And just to come back on that, so I think if you look at, markets like California now that are further along this journey of having more solar Mhmm.

You do see those batteries playing that that role where they're buying low and and selling high, performing that arbitrage strategy. And maybe at the moment, the batteries is more of a mix between providing these network services and conducting this arbitrage strategy. But going forward, absolutely, we see that as as something that's gonna be happening, and we need to make sure that the network can can recognize that and actually can be the network can be controlled so it remains within safe limits even when you have lots of storage and lots of solar and that you actually do get that coordination and there's no risk that that parts of the network will become overloaded.

And And I suppose you're also looking at other markets too. Right? So outside of the UK, where has this been done well in terms of, managing the connection process?

So I think the connections queue is is a challenge in almost every single market. Right? What developers and investors are seeing is that there needs to be a lot of renewable energy projects in particular that are built, and therefore, you know, hopefully, there's gonna be some return on investment to be made. And developers are also seeing that you cannot develop a project unless you have a grid connection.

So so developers are are really going after those grid connections, which is the logical response when you see that happening.

I think the situation in Ireland has been interesting. It's something that I've personally experienced where there was an absolutely massive connections queue, and then there have been various rounds of reform where the regulator has prioritized certain types of projects for good connections.

So initially, it was based on who had secured planning permission, then there were different rounds for offshore wind, different rounds for battery, things like that. That that kind of system of prioritizing certain different technologies, we think potentially has merit, but it also makes us concerned as as a developer, particularly if the rules are uncertain and it's not clear, you know, what the prioritization process is going going to be. So so we almost see that as the last resort rather than the first resort. We think the first resort has to be introducing tough milestones on developers that say to them, you must be seriously progressing this project towards energization or you will have to leave the queue. And, you know, that probably comes on to some of the reforms that are coming in in in Great Britain at the end of this year, but we certainly see those milestones as the first line of defense.

Yeah. And I think that's that's kind of exactly where the reform is pointing. Right? So maybe not towards individual technologies, although maybe put a pin in that because it sounds like that might come back. But, we're not looking at specific technologies. We're looking at a much more gated process in terms of the current proposals.

Yeah. So there's there's some new proposals on the table at the moment to change the grid queue connection rules, and those are modifications to the connection and use of system code, the CUSC, which is one of the codes that all of the the projects on the transmission network have to be have to be signed up to, and that and that governs the contract contractual relationship between developers and the ESO and also the transmission companies. And it also affects the distribution connected, projects indirectly because the DNOs are are party, to that code, and so they pass through those obligations to their customers.

This is this is like for for energy energy wonks. It's kinda like it's the thing that they it's how the whole thing is governed. Right? Yeah. So these are very much the rules that govern everything.

When we get to a certain level of detail, you will almost certainly come across the cask and modifications to it.

Yes. And and, you know, these documents are incredibly long, and they're subject to quite a nonintuitive governance process. So it's it's open governance or industry led governance. So any industry participant who is signed up to those codes can propose a change. So low carbon could propose modification to any one of those codes that we're signed up to, and it would have to go through that industry led governance process.

Now that could be quite frustrating if, for example, the regulator or the ESO wants to push through certain types of changes because it has to go through this this open process where the industry is has a formal role. You form an industry working group. The industry can then propose alternatives, and those alternatives then go to Ofgem alongside the original proposal, and then Ofgem decides which one it's gonna accept.

So that can be quite a frustrating process, but I think it really has a lot of advantages having been involved in in a lot of these work groups for the these current reforms because you actually get the people who are affected by the rules, sort of pointing out the things that they don't think will work and having the formal opportunity to propose an alternative, and then it's up to the regulator to decide.

Okay. And so what are you what are you kind of really excited about in terms of the changes that are being made in terms of actually, let's get rid of some of this seven hundred mega seven hundred gigawatts, sorry, of of ConnectionQ, and let's get on with the projects that actually are gonna work and go forward. Yeah. What what are you excited? What's gonna what's gonna make the difference?

So we see the so so I should just wind back and say it's the ESO that is proposing these reforms, and they have raised two code modifications, CMP four three four Oh. And CMP four three five, which people can go and read if they want. We think that those proposals have two main parts. The first part is that projects will be required to be making progress.

Otherwise, they will effectively lose their position in the queue, and they'll be put in a pre queue that was known as the hopper for a while. So, effectively, they're in the waiting room. Yeah. And as far as the the actual network modeling is concerned and the connection date is concerned, those projects sort of don't exist or they're right at the back of the queue. Okay. So you have your gate one hopper, and then you have your gate two queue effectively.

And what are the things that mean you're in one or two?

So there is going to be a gate two criteria, and you must have met the gate two criteria in order to be in gate two.

And, effectively, that is you have to secure the land for your project.

Now we think that is the right place to put the put the barrier. In our view, if you don't have land, you effectively don't have a project. You have a grid connection offer.

It is that land that carries through the whole way through the project. You get your land. You submit your planning. You secure your planning, and then you build your project on that land. So we think land rights is absolutely critical, and projects will if these proposals are approved, at the end of the year, the projects will lose their position in the queue, if they haven't secured their land rights, which, for example, is an option to lease the land to install wind turbines, batteries, or a solar farm. Mhmm.

National Grid has or National Grid ESO, ran a request for information, asking developers whether or not they currently meet that requirement or not because we don't want a situation where everyone meets the requirement because then the queue is still seven hundred gigawatts.

Two thirds of the queue responded, so one third didn't respond. Of those that did respond, half said they currently met the requirement and half said they didn't. So the ESO's conclusion is that these reforms could halve the size of the queue. We think that's that's possible. A lot of those projects that didn't respond may not have met the requirements.

A lot of developers say that they will be able to secure their land rights by the end of the year and therefore will be able to meet the gateway requirement.

But developers are, you know, inherently an optimistic bunch, and we'll have to see whether or not that is the case. But we're really positive about that, that part of the reform which says you have to be moving forward quickly.

There's additional bits as well that we think make the reform even stronger in that regard. So the first one is that you will now have to submit your planning application quickly after passing through the gate two requirement. Okay. So once you've secured your land rights and you've received your position in the actual queue and you're no longer in the hopper Yeah.

You will have to submit planning in a timely manner, which for different different planning regimes might be between one year and three years in order to keep your position in the queue. That is a fundamentally different and more and a higher barrier than we currently have. Currently, you don't need to submit planning until three three or four years before you energize Mhmm. Which for a project with a twenty thirty seven connection date means you don't have to really do anything till twenty thirty.

So there are downsides to this approach because you're asking developers to submit planning very early in some cases.

Does that potentially mean we might have of the seven hundreds, let's say we half it three fifty, we're not gonna have three hundred and fifty gigawatts of planning applications going, are we?

Well, we'll have to see. I mean, I think if developers will have to take a view based on what the the connection dates that come back after this these new rules have been applied. Okay.

If their view is that, you know, their project is still at twenty thirty seven and there's no prospect of it being brought forward, that developer will have to decide, do I want to spend millions of pounds on a planning application?

Or, actually, do I take the view that the market is oversubscribed? And maybe I should come back in a few years' time and leave the queue for now.

Can we talk about the cost element of this? Because we kind of haven't really touched on it up until now. This is massive infrastructure. This is billions, potentially trillions globally or certainly trillions globally going into these projects. We are entirely replacing and upgrading electricity system.

How much are people having to to pay to kind of go through stage one, stage two? Is this costing developers a huge amount of money, or is this quite light?

Well, so I could probably talk mainly for solar projects. The grid connection application fees are in the tens of thousands.

Securing the land will cost you in the hundreds of thousands, and submitting the planning application will cost you in the millions, and building the project will cost you in the hundreds of millions.

Okay. That was working really nicely in factors of ten until that project was just too expensive.

It was. Yeah. And that's and that's for typical five hundred megawatt well, increasingly typical five hundred megawatt Yes. Admission connected solar project. So those costs really do ramp up, but they ramp up, you know, in line with the milestones. First, you secure your land and then and then you do your planning.

Does that does that feel a bit odd? Right? So I'm sitting there as an investor. I'm gonna put in hundreds of millions of pounds into this project or potentially hundreds of millions of pounds. And the requirement for me to get to that stage is a ten thousand pound application.

Feels a bit Well, that's not where we are anymore, right, under these proposals.

That's not where we will be. Because effectively, the the barrier to entering the queue currently is you can pay tens of thousands of pounds for a grid connection application fee. In future, the barriers you have to have secured your land. So that's the hundreds of thousands.

In the case of offshore wind, it can be a lot more expensive. We've seen the the outcomes of the Crown Estate leases. Mhmm. So that barrier to entry has been is being significantly raised, and we think it's an appropriate level.

If you wanna be if you want a system where all developers are moving quickly, then developers are gonna need to be able to to stump up the money for, for example, securing land rights and then submitting planning in a timely manner after that.

So so super interesting. I think maybe it's a little bit of this where the devil's in the detail. So let's say you have you have your land. You have your you've been in you've been in the hopper. You're now at the hopper. You're in sort of stage two. And they're now looking at, say, ten projects that are identical, all coming through, all ticking the boxes, all now standing there ready to go, which one of those goes first, which one of them goes last?

Yes. This probably gets to, like, the tiebreaker criteria. Yes.

Everything should have a tiebreaker. Okay.

So so that is that that is a bit of a black box at the moment. So well, in the proposal in in the current rules, it's based on this idea of whose grid connection application was submitted first.

Okay.

So First come, first serve.

First come, first serve. Yeah.

First come, first serve. It's currently not clear how exactly that's gonna work under the new system. So if if if we both so they're gonna be windows in which you can submit your gate to evidence, I. E.

Your land rights, and move from the hopper to the actual queue, which is where people wanna be. It's not entirely clear how projects are gonna be prioritized in each window. And there's also a a much deeper uncertainty actually around around how projects are gonna be prioritized. Mhmm.

So if I just step back, I said that the ESO's proposals in our view have two parts. The first one is ensuring these milestones are tough and projects are moving forward. The second one is that the ESO is seeking powers to prioritize certain projects in the queue, and that's the that's the bit that makes us more nervous. The the first part around milestones, that's very objective.

It's very clear what everyone needs to do. And as a developer or as an investor, you can take a view as to how likely it is that you'll get accelerated. All you have to do is look at the projects that are ahead of you in the queue and take a view on whether or not those are good projects. That's not entirely simple, but at least there's a very clear criteria there.

If the proposals go through as is, the ESO will have the power with Ofgem's approval to prioritize certain types of projects in the connections queue, and they publish very few details about what those rules will be and how they'll work in practice. They're actually not part of the rule change, the code modification that's going through. They're gonna be housed in separate methodology documents.

Is there any guidance to how or what they might be optimizing for?

Not really at the moment. You know, there's if you read the work group consultation on these on these rule changes, there there there there are lots of ideas about how this can be done. There were separate earlier publications from the ESO as part of their connections reform about how this could be done.

The real worry for us is that as a developer, as an investor, you want projects that can be connected quickly, and you wanna invest now in your project in the hope and expectation that will be brought forward using a very clear set of rules. So we could invest today in a project on the basis that will be brought forward. If we now have some very uncertain methodologies that we don't know what they are and we don't know how they're gonna operate in practice, the logical thing for a developer to do is to secure their land and then do nothing. And we would have to wait until September or October next year to see how the rules work in practice in the first round of this new process, which basically means a year of investment hiatus at exactly the wrong time for the new government's goals around its clean power mission. So we think the ESA really needs to, you know, think again on this.

Definitely bring forward these part one reforms around milestones Mhmm. Which we think it could be very powerful, and we think that the land rights request for information that the ESO has issued demonstrates these will be very powerful. But on the part two, prioritizing different projects in the queue, there's just too much uncertainty at the moment, and there's probably not enough time to come up with a credible process before the end of the year. So we think that should be stripped out, and then it should be brought forward next year as a subsequent rule change once the ESO has done the work and can tell the industry how these rules are gonna work.

Okay. So maybe there are two kind of really interesting parts of that. First one, Labour's sort of objective for clean power by twenty thirty. How realistic do you think that is with this connection reform?

Well, so if you just look at the the connect the twenty thirty goal as a whole, it's clear that we can build a lot more renewables in that time frame. We are starting to bump up against the project lead times for for if you're developing a brand new offshore wind farm, for example, from today. Is it realistic suggesting we connect by twenty thirty? Maybe, maybe not.

But, certainly, there's a lot of in flight projects that we can deliver, and, certainly, something like solar and onshore wind, and batteries can be deployed very quickly and and contribute to that goal. Are we gonna be in a situation where none of the gas power plants are running in twenty thirty? I don't think so. No.

I don't think the government thinks so either. And in the discussion around the the clean power mission, there is a recognition that there needs to be a strategic reserve of gas fired power stations.

So whether or not the goal is met will really depend on largely what that definition of strategic reserve is and and therefore how much gas, you know, is this a ninety percent target, a ninety five percent target, or a ninety nine percent target?

What does what does clean mean? So, you know, in the context of being six hundred grams of c o two per kilowatt hour maybe ten years ago, If you're now at nineteen or or twenty or twenty five, we occasionally see on the grid these days, like, relatively, that's extremely clean, but but maybe not zero. But perhaps there's some nuance in the the wording of it.

Yeah. And I think it's I think it's gonna be important for the industry to see to have a clear steer on what that target actually means in practice because, you know, the reality is at the moment, we can build a lot of renewables, and we absolutely should do, but we also need to make sure that we have those gas fired power stations there if we need them. And if the there is the wrong signal sent to those operators, then there's a risk of increasing costs later. I saw the results of the PJM capacity market in the last couple of days that were very, very high prices in that capacity market. I don't know the details of that, but, certainly, you could foresee a situation like that in GB if we have the wrong signal being sent to those those operators of those power stations, which although they are not clean or net zero aligned, they do play a very important role in the electricity sector and certainly will be doing so as well, as we approach twenty thirty.

And I think this kinda comes back to something you were saying earlier that if you've got projects that are in flight, to get them to go slightly quicker is kind of doable. If you run a capacity auction and you now need to start getting projects that aren't yet in flight or actually are quite a long way behind and need to get them to deliver very, very quickly, it's gonna cost a lot of money to get there. And so you kind of get these kind of very can be very high sort of outcomes within certain capacity markets or auction processes. Okay.

Super super interesting. I just wanna go back to one thing around the almost like the the the spatial energy piece. So ESO becoming Nissan taking on more oversight of the kind of total energy picture within GB. I'm sure that links into some of the connection and this kind of prioritization of certain projects.

Do you worry about what they might choose to prioritize?

Yeah. So so, historically, we've had a very market driven system in this country, and that has led to, in some cases, some very good outcomes. You know, we saw gas coming on quickly in the nineties. We then saw coal rolling off very quickly in the twenty tens, and we've seen renewables ramping up, very quickly in the last ten years.

We've also seen some bad outcomes, you could argue. We saw lots of diesel powered gas engines coming through, making use of the triad embedded benefit, which is a sort of anachronism within the network charging methodology, and then that that sort of loophole got closed quickly. So there there are pros and cons to that market based approach, but I think, generally, it served us pretty well.

Mhmm.

And for an investor and a developer, it's it's good to have, you know, very clear market rules there.

There is now clearly a desire in the government and Ofgem and the ESO to have more strategic planning. Some of that, I think, is in response to the scale of the challenge, and, actually, there are certain types of net zero infrastructure that would benefit from that sort of spatial planning and clustering, particularly when you look at carbon capture and storage and and hydrogen clusters and things like that. But I don't think we need to throw away the market based approach.

Mhmm.

And we need to be prudent here. We don't want the grid connections queue to just juggle all the balls in the air. No one knows what's happening with their connection dates, and then there's this investment hiatus that I was talking about earlier. You know, we need to be prudent. The policy on strategic spatial energy planning is not currently well developed within the government, and that needs to be developed in the context of the government's new clean power mission, which any previous work now needs to be relooked at.

That work really needs to be done by the government before it can flow through the rest of the system to Ofgem, to the ESO, to the codes, and then it affects developers.

It just feels like we don't have the time necessarily to do that. Right? So twenty twenty four, we rerun some of these processes to go and adjust codes. We're talking three years before that comes into three, four years maybe at a push.

We've got a lot of things to deploy before twenty thirty. I mean, we do we have like, we don't have that time, surely.

Well, the the the reforms specifically to the energy network codes, like like the CUSC, can be done quickly, and they can particularly be done quickly when it's clear what is being proposed. Mhmm. So if if the ESO comes forward with a rule book and says, this is the rule book. We wish to put it into the code Mhmm. And these are the reasons why, then, actually, you can go through that process pretty quickly.

You know, you don't you don't wanna be coming forward with with proposals that, you know, are hard for the industry to understand because you will then get a lot of pushback, a lot of concerns, and and the process will then be be elongated.

You gotta go back, I think, as well to the the twenty thirty mission and how many of the projects that can deliver for twenty thirty are not currently in flight.

And so there's there has to be a question about how much strategic spatial energy planning can contribute to to that goal and, actually, how much of it is about speeding up projects that are already in the queue. We know there are huge volumes of offshore wind in the queue, huge volumes of onshore wind, huge volumes of batteries, huge volumes of solar, and a lot of those projects can deliver quickly. And those in flight projects are almost certainly gonna be doing the heavy lifting for this twenty thirty target. Yeah. And so we need to make sure that we're not putting those at risk and telling those developers and investors to to hold off because we're about to juggle all the balls in the air, and we'll find out in q four next year how these new rules work in practice. Yeah.

Is that maybe the message to government, right, that there's solar, there's wind, there's battery storage, all very modular, all being deployed today, established supply chains. We'll see them coming through.

Don't bump something to the top of the queue where we haven't got good evidence around its ability to deliver?

Well, I'm not sure what the necessarily, the example of that would be. Maybe floating offshore wind would be would be the be the main example. Hydrogen power, CCS?

Possibly. I mean, I I I haven't really seen that as the main direction of travel, but I haven't been involved in in the discussions around the spatial planning.

I think they're further than twenty thirty.

Yeah. So so, I mean, you could see something like floating offshore wind being brought to the front of the queue. That that might have merit, but I think we need to see the analysis before the ESO takes the powers to to do some of these things with Ofgem's approval because otherwise that that really creates an uncertain investment environment for developers and for investors.

I think it's super interesting. We're seeing kind of the political will meeting the kind of engineering reality mixed in with the kind of commercial heads, and how does all of this then get washed through the kind of world of codes and industry groups.

Everyone's very much aligned. Everyone wants to make it happen, but it's kind of like how quickly can we make all this go. Super interesting. Final two questions. First question is, is there anything that you'd like to plug? Yeah.

So you asked me this before we started, and I didn't have a good answer. For anyone who's interested in market design, which is something that I'm very interested in, I'd recommend reading the market monitor reports for the deregulated US electricity markets. So, for example, the market monitoring report for the New York independent system operator for ERCOT and for the California ISO. I think they give a real insight into some of the challenges that that power markets are facing. And so there's some really interesting ideas in there around moving to zonal capacity markets, moving to nodal capacity markets, to node or capacity markets, dispatching different network services alongside the wholesale market in a central dispatch model. Just some really interesting snippets buried throughout those reports, if that takes you fancy.

Absolutely. That's a great recommendation.

And, controlling view, so is there anything that you believe that the majority of the market doesn't?

Yeah. So haven't sounded market opinion that widely, but but one thing I'm thinking and one thing that Low Carbon's thinking a lot about at the moment is the number of new substations that have been triggered within Great Britain, particularly at the transmission network level. You know, we're talking potentially now a hundred new transmission substations have been triggered. The distribution companies are triggering new substations all the time next to their existing transmission interface, those grid supply points, and that is a that that is just gonna be a huge barrier if those substations are all needed.

And so, really, what we're thinking about is how can you do more with less, through things like these regional balancing mechanism that I mentioned earlier Mhmm.

And other ways of limiting and controlling the power flow of generators on the distribution networks. We think that actually has a real chance of working, especially alongside the key reforms, and that actually, you know, the vast majority of those substations will not be needed. So that's something hopefully, it will happen. Yeah. But we'll find out.

No. I think I think hugely interesting. How do we do much more with the kind of the the infrastructure we've got? I think hugely important topics.

So that's that's probably the contrarian view, really, is that the the narrative that you often hear around the grid is that we just need to build more. Mhmm. We need to build a lot, but we also need to use what we've got a lot smarter.

And in our view, there is still some serious low hanging fruit to be picked in terms of using the existing network better. Okay.

Ed, thank you very much for coming on Transmission. Huge amount of insight into how we actually get all of this done. So thank you very much, and, let's have you, back on again soon. Thanks, Ed.

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