The UK Government has made policy commitments to achieve Net Zero by 2050 and decarbonise the UK's power system by 2035. In a context where electricity demand in the UK is expected to almost double by 2050 and demand and generation profiles are expected to become more granular and complex, it is recognised that achieving net-zero policy goals will require significant investment and development of the UK's electricity network.
A key component of achieving these policy goals is the deployment of renewable generation, and there is a growing backlog in effecting such new connections under the current system, which operates (broadly) on a 'first come first served' basis. With almost 300GW of renewable projects stuck in the queue to connect, new projects are being given increasingly distant connection dates – in some cases over ten years' away.
This issue has become increasingly apparent and recognised as a bottleneck on the road to Net Zero. In response Government has recently published a swathe of new guidance, regulation, and policy to reform the grid connections regime, sweep away the 'zombie projects' clogging up the queue to connect, and speed up the timeline in which renewables projects are able to connect to the grid. This article looks at some of the recently announced measures which follow the Autumn Statement and the recently enacted Energy Act 2023, and we are expecting a broader range of measures to follow that will set out the more detailed proposals for changes to the process of connecting renewable generation project to the UK's electricity network. This will be followed closely by renewables developers and investors, but also by all those who are looking to connect to the grid for other purposes such as site developments or capacity upgrades.
Grid connection reforms – Queue Management Process
On 13 November 2023, Ofgem approved the implementation of a new 'Queue Management Process' for projects connecting to the UK's transmission network. The approval of this new grid connection procedure is effected through amendment CMP376 to the CuSC and represents a first step to accelerate deployment of queued projects and reduce the timescale for connecting new low-carbon generation to the UK's electricity system. This follows the National Grid's 'amnesty' for developers earlier this year allowing developers to withdraw from the queue without penalty, which released around 5GW of capacity.
The new 'Queue Management Process' came into effect on 27 November 2023, and departs from the current 'first-come-first-served' system, allowing the National Grid to terminate projects which have been stalled and are effectively blocking the queue. The new system will impact all new projects, and existing projects with a connection offer and which either have a projected completion date of beyond 27 November 2025 or projects with a completion date before 27 November 2025 which have stalled.
The proposed Queue Management Process will insert fixed milestones into the projects' construction agreements setting out target dates to hit key objectives from the outset of a project. This will include obtaining planning permission and securing land rights through completing design works to commencing build out. If a project fails to achieve a milestone by the target date and remedy that failure within 60 days, then the National Grid electricity services operator (NGESO) is obliged to terminate the construction agreement, if the milestone is one of the three 'Conditional Progression Milestones', or has the right to terminate the construction agreement if the milestone is one of the four Construction Progression Milestones. Milestones can only be moved in very limited circumstances such as force majeure, which departs from the current system where the modification application process is commonly used by developers to push back timescales and avoid or delay their connection contract being terminated.
Further grid connection guidance from the NGESO was published on 27 November detailed how Ofgem expects the new Queue Management Process to work, be implemented into new and existing contracts, and sets out what they expect to see contractors produce as evidence to show compliance with the new regime.
Connections Action Plan
On 22 November 2023, the Government published its Connection Action Plan, which sets out in further detail its proposed changes to accelerate the grid connections queue, including the changes to the CuSC described above, which have already been implemented.
It sets out six key areas where Government and Ofgem, along with NGESO and other network companies, need to take action to reduce the delay in connecting to the grid, namely:
- Raising entry requirements - for projects seeking to connect to the National Grid Transmission System, to prevent unviable or speculative projects entering the queue and delaying connection dates for viable projects. In particular, the Connections Action Plan proposes that a landowner's letter of authority allowing the potential project to be developed will be needed prior to any transmission network connection application being accepted.
- Removing stalled projects - This covers both the Queue Management System effected by CMP376 as described above, but Government is also looking to review and improve enforcement of connection milestones at distribution level.
- Better utilisation of existing network capacity - including reviewing how the impact of connections is measured by NGESO and other network companies. This will include an NGESO-led review of how battery energy storage systems' (BESS) impact on the grid is currently modelled.
- Better allocation of network capacity - DESNZ in collaboration with the Office for Investment will begin triaging projects based on their viability, with the aim being to move away from the current 'first-come-first-served' system and to focus on connections for the most viable and strategically important projects.
- Improving data collection -and increasing obligations and incentives on NGESO and other network companies to give connection customers (generators and off takers) better quality information and reduce speculative applications, as well as improve quality and consistency of service by network companies.
- Developing longer-term connections process models - this is intended to cover futureproofing of the processes including accelerating network building, strategic network planning, and potential market reform, which are primarily dealt with in the accompanying Transmission Acceleration Action Plan (see below).
It is recognised that implementing the necessary changes will require engagement and action across a broad range of industry stakeholders and the intention is for an Ofgem-chaired 'Connections Delivery Board' including the UK and devolved Governments, the NGESO and network companies and connection customer representatives, to be established to set strategy, monitor progress, and set out further actions as and when required.
Transmission Acceleration Action Plan
On the same date as the Connections Action Plan was published, the Government also published its long-awaited response to the Winser Report in the form of the Transmission Acceleration Action Plan. In it, the Government broadly accepted the Electricity Commissioner, Nicholas Winser's, recommendations in the Winser Report with the aim to halve the total development time for transmission infrastructure.
Building out the necessary grid infrastructure is a key step in the UK's commitment to reaching Net Zero in order to increase the amount of grid capacity available for generators and offtakers to support the continued deployment of renewable generation, but also to support fundamental changes in the way energy is consumed alongside electrification of key industry sectors such as transport and heat. The Transmission Acceleration Action Plan intends to halve the time it takes to deploy the necessary electricity transmission network infrastructure from 12-14 years to 7 years, and is intended to complement and support the Connections Action Plan. The key recommendations include:
- setting up a Strategic Spatial Energy Plan (SSEP), Centralised Strategic Network Plans (CSNP) (based on the SSEP), and National Policy Statements and National Planning Frameworks, to set out Government policy across the entire energy system, both onshore and offshore, in order to facilitate planning and building out the new infrastructure;
- establishing a working group to progress a set of Electricity Transmission Design Principles (ETDP) to better standardise infrastructure and equipment design.
- establishing a Supply Chain forum to identify industry wide supply chain challenges and seek to take a more strategic approach to removing barriers to investment and supporting the expansion of domestic supply chain capability.
- NGESO providing strategic outage planning across a range of timescales to increase system reliability and reduce the cost to consumers.
- reforming and streamlining the regulatory approval process, further details of which are expected as Government, NGESO and industry develop the SSEP and CSNPs.
- reforms and updates to planning procedures including the introduction of 'fast-track' approvals and more frequent updates of the National Policy Statements.
- new measures to encourage local community engagement, and a new ministerially-chaired Transmission Acceleration Forum to include industry, regulators, NGESO, and devolved administrators, to track the progress of the Transmission Action Plan and monitor the impact of new transmission infrastructure.
Further upcoming changes
To meet the UK's Net Zero commitments, it is clear that reform is needed to the distribution and transmission networks. The process for connecting to the UK's electricity system has come sharply into focus in recent years in response to growing concerns over timescales for connection, and the impact of delays and accompanying risks on investor confidence. The measures recently announced to reform the grid connection process should be seen as a first step towards addressing this connection bottleneck, with the detail of how the stated strategies will be implemented largely to come.
It is also worth noting that the grid connection process forms only part of the system-wide updates required to meet the UK's climate policy goals for its electricity network, and significant changes to the infrastructure and organisation of the UK's electricity network are incoming – for example:
- under the Energy Act 2023, Ofgem has acquired a statutory duty to comply with the Government's Net Zero targets; and NGESO will be granted a more strategic and holistic remit of the electricity network in the UK as the Future System Operator (FSO).
- the Government also updated and published its new National Policy Statements for energy on 22 November 2023, which set out the Government's strategy towards procuring and assessing energy infrastructure projects, including nationally significant infrastructure projects. These are intended to go before Parliament in the near-future.
- the Government also published its response to the Community Benefits for Electricity Transmission Network Infrastructure consultation on 22 November 2023, which looks at the appropriate levels and forms of benefits communities could receive alongside transmission network infrastructure being constructed.
- Ofgem announced separately on 15 November 2023 that it will create Regional Energy Strategic Planners (RESPs) to coordinate regional energy planning and needs across the UK, to be brought together under the incoming Future Systems Operator (itself to be introduced under the newly-enacted Energy Act 2023).
- as part of the Government's Autumn Statement, £960mn was announced for green industries under a "Green Industries Growth Accelerator". This figure is specifically cited in the Government's Transmission Acceleration Action Plan and is intended in part to address supply chain concerns, including in grid connections.
- National Grid has also increased its investment plans to £42bn by 2026 to help address the connections delay issues.
This broad range of measures and policy statements will have impacts across the entire energy industry and builds on existing initiatives such as REMA which in combination have the potential to fundamentally affect the intricate workings of the highly regulated energy sector. Given the level of investment required and the importance of having a national electricity grid that allows the UK to achieve its decarbonisation goals, while maintaining security of supply and affordability for consumers, we will be following developments closely over the coming months and years to analyse the detail as policy is developed and implemented.
