Terminating zombies – grid connection reform

read time: 6 mins

Securing a grid connection is one of the most significant barriers faced by renewable energy projects in the UK. There is a long queue of energy projects in the UK waiting to connect to the grid. Ofgem, Great Britain’s independent energy regulator, estimates that if operational, these queued projects could generate around 400GW of electricity, enough to power the entire British energy system. However, significant reform of the grid connection system is required before this generation potential is unlocked and the UK can make headway towards its net zero goals.

The current system

The connections queue faced by developers is the result of an increase in the number of grid connection applications in recent years, combined with the  ‘first to contract, first to connect’ approach that has been taken by the National Grid Electricity System Operator (NGESO), the body responsible for operating the electricity transmission system in the UK. 

Each new application seeking a grid connection in the UK is submitted to NGESO, which considers the application and then issues the applicant with an offer detailing the terms of connection. A ‘connection contract’ is then formed between the applicant and NGESO, setting out the works required by the applicant and a completion date by which these works should be carried out. 

Applicants are then placed into a queue for a date of connection to the electricity grid, based on the date on which the connection contract is formed. The earlier an application is submitted, the sooner the connection date, meaning that new applications are submitted to NGESO each day with developers hoping to secure their place in the queue ahead of other projects.

The connections queue contains a high proportion of projects that are progressing slowly or have stalled altogether. Ofgem also suggests that many of the queued applications have been submitted speculatively by developers seeking to establish a place in the queue, and that some of these projects may be entirely non-viable. These are collectively known as ‘zombie projects’, and have reportedly resulted in around 60-70% of all projects in the queue failing to connect or materialise.

This queue has created issues for developers, as the dates of connection now offered to applicants have become increasingly distant. Ofgem report that around 40% of the projects currently in the queue have connection dates of 2030 or beyond. 

The backlog also presents a risk that ready-to-go, and often green, energy projects are being delayed. In turn, this is frustrating the UK’s progress towards net zero. Additionally, the distant dates of connection offered by NGESO are deterring investment in the UK’s energy sector and are potentially harming UK energy security.

Reforming queue management 

It is clear that the current grid connection application system requires reform. In recognition of this, Ofgem has approved a modification (CMP 376, specifically WACM7) to the Connection and Use of System Code (CUSC). The CUSC makes up the framework for connection to the UK’s transmission network. 

CMP 376 introduces a queue management process into the CUSC. Moving forward, milestones will be introduced into connection contracts between applicants and NGESO.

Milestones may be ‘conditional progression milestones’ (relating to planning permission or land rights) or ‘construction progression milestones’ (relating to a construction programme, design, or project backing).

These milestones will essentially act as indicators of project progression. Developers will be required to submit evidence to demonstrate how they comply with these milestones throughout the course of a project. Milestones will be calculated backwards from the completion date of a project. 

Who is affected and when?

The queue management process will be introduced gradually into connection contracts following the implementation date of 27 November 2023.  More specifically, milestones will be included in connection contracts:

  • entered into after 27 November 2023;
  • entered into prior to 27 November 2023, where the connection date is two years or more from that date; and
  • entered into prior to 27 November 2023, where the connection date is within two years from that date and the project is not able to demonstrate adequate progression.

Queue management provisions will automatically be incorporated into any new connection agreements entered into after 27 November 2023. 

Those with existing connection agreements will receive a notification from NGESO and will be invited to make a modification to their connection agreement, for example to amend their completion date if the project is not progressing as expected. If an applicant seeks amendment, the queue management provisions will be incorporated into the new agreement during the contract variation process. If an applicant does not vary its application, NGESO will automatically vary the agreement to incorporate the provisions six months after the notification.

Terminating applications

For the first time, NGESO will have the ability to pro-actively manage the grid connection queue, and will be given powers to terminate grid connection applications that fail to demonstrate compliance with the milestones they are set. 

Unless an exception applies, failure to comply will trigger a ‘milestone default notice’ from which a 60 calendar day remedy period will run. In this period, developers must submit satisfactory evidence of compliance with milestones. 

If evidence is not provided, the next steps depend on the type of milestone not complied with:

  • if a conditional progression milestone is not complied with, NGESO will terminate the connection agreement; or
  • if a construction progression milestone is not complied with, NGESO may terminate the connection agreement.

This reform should enable the removal of stalled or unviable projects from the grid connections queue, therefore freeing up network capacity for well-managed, viable projects. Overall, this reform should help to improve the grid connection application process.

Next steps 

This grid connections application reform will come into force from 27 November 2023. It will be accompanied by guidance from NGESO, giving further practical information on how the queue management system will work.

Developers with existing grid connection applications should review their applications, in particular their expected completion date. If the project is not progressing as expected, a modification application should be submitted to update the completion date, or the application may be terminated. 

Developers submitting new grid connection applications should think carefully about when is most appropriate to submit. They should also avoid submitting speculative applications in order to secure a place in the grid connection queue. 

The queue management modification is only one part of wider reform to grid connection arrangements in the UK. Further changes are afoot, with a joint Connections Action Plan expected from Ofgem and the Government shortly.  

If you have any queries or would like further information on the reforms, please contact Brian Farrell, head of the energy & resource management sector at Ashfords.

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