We hear from law firm Freeths about the latest on the National Energy System Operator’s (NESO’s) grid connection queue reforms, which will completely rewrite the system for connecting projects to the grid.
The reforms, intended to help clear the backlog of 739GW, which far outweighs any forecasts of future UK electricity demand, have been discussed for a few years, but the speed of progress has accelerated since Labour won the election, Freeths’ clean energy knowledge lead Shraiya Thapa told Current.
The system has historically been first-come-first-served but that is now set to radically change.
Move to a gated system progresses under new government
“This has all happened very quickly recently. The really rapid progress on this has been in the last six months, as the new Labour government brought forward the clean power target to 2030, when it was 2035 under the previous government,” she said.
“The move to a first-ready-first-connected system was established around a year ago, but a new ‘first-needed’ aspect has come into play in the last six months.”
The final proposals for the methodologies that will be used to move the entire queue into one of two ‘Gates’ is expected to be released on Friday this week. Should that be approved by Ofgem, hopefully in Q1 2025, NESO can then begin the process of working out which projects get Gate 1 or Gate 2 offers.
Gate 2 will be the new queue, while one developer recently characterised Gate 1 as containing projects that ‘essentially do not exist as far as the system operator is concerned’.
Demonstrating a project is ‘ready and needed’
To enter Gate 2 project owners will need to demonstrate their project is not only ready to progress but also ‘strategically aligned’ with the needs of the system, i.e. ‘needed’.
“Being ready means having some kind of land rights in place or, for projects following the DCO route, having submitted an application for planning consent,” Thapa said.
“Then you will have to show you are needed. For most projects this will mean showing you are strategically aligned with the Clean Power 2030 (CP30) plan. It is also possible to qualify as a transmission-connected demand project outside of the scope of CP30 or through being a ‘designated’ project.”
As previously reported by Current±, other ways to demonstrate strategic alignment include having a contract for difference (CfD) or capacity market (CM) contract, having achieved planning by the end of May 2025 under current timeframes, while there are exemptions for being under construction or due to commission by end of 2026.
“However, NESO still needs to clarify exactly what ‘under construction’ means , as at the moment it could just mean having a spade in the ground,” Thapa added.
New figures from CP30 provide some clarity
The government released its full CP30 Action Plan, a plan and package of reforms for achieving clean power by 2030, on Friday last week. The report contained figures which will help developers know how likely NESO is to deem their project is ‘needed’.
Thapa said: “These show by technology type what the government thinks is strategically needed and where across 11 transmission and eight distribution zones. NESO will look at these zones and figures and, when giving out its grid connection offers, decide how much of what technology from the queue is needed where.”
For example, the report forecasts that 27-30GW of battery energy storage systems (BESS) will be needed by 2030, up from the 4.5GW online today.
The newest aspects of the reform
There are two additional aspects of the grid connections reform which have come out as proposals very recently. One is a new financial instrument which would mean putting up a certain amount of cash security to be able to pass Gate 2, currently proposed at £20,000 per MW.
“You could lose it, or a portion of it, if your project doesn’t hit milestones and get built or is reduced in size. This would be an enhanced version of the current securities regime, essentially making the bar higher at an earlier stage than is currently the case,” Thapa explained.
National Grid Electricity Transmission (the transmission owner for England and Wales) has also proposed increasing the threshold for a transmission impact assessment from 1MW to 5MW, and projects under this size could be exempt from the new Gate 1 and 2 system and its requirements, Thapa said.
“It’ll be interesting to see whether it’s a clean or uniform 5MW, or whether there will be exceptions based on regional constraints as, for example, 4.9MW could be significant in some places. Project sizes also often follow ‘clean’ thresholds as evidenced by the amount of BESS projects built out to 49.9MW due to planning thresholds,” she added.
Hard to gauge the impact of the reforms; some will be affected more than others
Thapa was reluctant to estimate any numbers on how much this will reduce the queue backlog. “It’s hard to estimate exactly how many projects will make it to Gate 2 as we’re still waiting for the final form of the changes, and the outcome of the process itself.”
She said that developers generally agree with the goal the reforms are trying to achieve, but there are concerns about some finer details and that “some developers will be much more adversely affected than others.”
Freeths released a technical summary of the main aspects of the grid connection reforms proposals on 11 November, available here.
