Unblocking the grid queue: What can we expect from the Connections Action Plan?

I was speaking very recently at the Westminster Energy Forum on energy security and how to maximise the grid. I was outlining the various initiatives that had been put in place this year with the aim of helping to manage the crippling grid connection queues that have been the biggest roadblock to new energy developments (and significant demand connections) over the last couple of years. Connection dates of 2037 have sadly not been an unusual phenomenon. I briefly discussed Ofgem’s “hot off the press” approval of CMP376 which will enable milestone dates (with associated termination rights for failure to meet them) to be included in transmission connection offers. I also mentioned the step change in approach we have seen from DNOs this year in their management of connection agreements, with connection agreements for dormant projects being surrendered, milestones being added into older connection offers that did not previously have them, and a proactive approach being taken by DNOs to terminate connection offers where milestones were not being met – in some cases reasonably and in some cases very harshly, based on what we have seen. We have also started to see changes to the way in which storage is modelled when considering network impact.  

Last week DESNZ and Ofgem published a joint Connections Action Plan. The stated aim is to reduce the average delay a project faces in connecting to the transmission network from five years to six months. At over 100 pages, it is reassuring to see the multiple and wide-ranging grid connection issues we have seen clients face over the last few years being acknowledged in a comprehensive way. It recognises that connection delays are “the biggest risk to our ability to decarbonise our power system by 2035”. 

Large sections of the document summarise the various action strands we have seen rolled out during the course of this year at both distribution and transmission level. Whilst Ofgem and DESNZ are expecting significant benefits to arise from the measures which have already been announced and are being implemented, the Action Plan also recognises that more extensive measures are still required. These will be driven forward by a new Ofgem-chaired Connections Delivery Board.

In addition to those new policies referred to above, there is a lot on the agenda, including:

• Raising entry requirements for transmission connection applicants, through requiring a landowner Letter of Authority to evidence permission from a landowner for a transmission network connection application to be accepted. This is the same principle as currently applies at distribution level. This will be applied on a voluntary basis for both new applications and modification applications (ModApps) pending the required CUSC change taking effect in early 2024. It seems that new applications are intended to be targeted first for the mandatory requirement, with ModApps being kept under review, although this will depend on the wording of the proposed CUSC amendment. It is unclear how this new requirement will be applied for offshore projects leading up to future TCE tender processes but there is no current suggestion that they are to be treated differently. Other potential measures to discourage speculative applications are mooted (such as increasing financial obligations for holding a connection offer, restricting the buying or selling of TEC or introducing a temporary freeze on new applications) but these are left for the ESO to consider further and bring forward proposals if considered necessary.
• Changing how the impact of connections is assessed by the ESO and network companies, and enhancing use of flexibility, including non-firm/flexible connections. It will be interesting to see just how creative the ESO and DNOs will get in this regard alongside the ongoing Transmission Acceleration Action Plan and on what timeframe. The potential for innovative engineering solutions and the use of alternative commercial agreements to share grid capacity are among the options open for greater consideration.  
• Moving away from the first come, first served approach to one that connects projects that are ready to progress and are able to quickly make use of capacity. DESNZ in collaboration with the Office for Investment intends to manage a triage process to ensure the “most strategically important projects” receive the strongest possible support to explore timely connection solutions. It appears that the ESO’s preferred options identified through its connections reform project launched in October 2022 are tentatively supported. This may see a new ‘gates and windows’ mechanism from Q1 2025 through which ESO will consider projects on a batched basis to enable the network to be designed in a more strategic way, with a second gate determining the queue position based on progress made and an assessment of priority projects. Further detail as to how this is recommended to operate is expected later this year and will not be straightforward given the need to recognise projects with differing development timelines, as well as distribution projects having an impact on the transmission network. 
• Improving data and processes and sharpening obligations and incentives on the ESO and network companies to give connection customers a better understanding of the condition of networks and improve customer service and consistency across the regions. This will include an end-to-end review of connections incentives, obligations and requirements on the ESO and networks companies. Our own experience is that there have been too many examples in recent years of failings in the interaction between DNOs and the ESO creating significant issues. The ESO’s preferred option for dealing with this is for the DNOs to have greater autonomy to allocate “Reserved Developer Capacity” which DNOs can apply for at each Grid Supply Point, which would reduce the need for them to consult with the ESO for individual connections. 

Even before the publication of the Action Plan, there was enough happening to prompt developers to take stock of current development practices. Starting the development process with “finding the grid” will of course still be just as relevant, but the timing of connection applications, consideration of milestones and assessment of the ability to meet them will be crucial and need to be given due consideration before speculative applications are submitted at either distribution or transmission level. 

The aims of the Action Plan are ambitious compared with where we are today and the measures being contemplated are extensive. Candidly, they need to be. It is hoped that in the pursuit of shorter connection timescales, investor certainty can be accommodated at a sufficient level to ensure that both generation and demand schemes remain fundable. Project development has always been, and will remain, unpredictable.  The enforcement of the new toolkit by network operators – and use of termination rights in particular where milestones are not met – is a key area the industry will be following closely.

It is reassuring to see the multiple and wide-ranging grid connection issues we have seen clients face over the last few years being acknowledged in a comprehensive way.