Let's Connect: National Grid ESO (NGESO) measures to accelerate transmission connections process

This impacts everyone, from low carbon generators and battery storage operators to energy intensive industry, data centres and real estate developments, and down to EV consumers looking for charge points. With the strides being taken – and significantly more expected to be taken – in moving Great Britain to a decarbonised society access to grid capacity is, without action, going to get more challenging and costly.

Recognising its role in this, NGESO has announced short-term initiatives and an interim two-step offer process to accelerate electricity transmission connections in the immediate future, while its longer-term Connections Reform Project is already underway.

“This is the start of an overhaul of NGESO’s offer and connection process, which will hopefully enable viable projects and those useful to the wider network to connect quicker and cheaper. BESS developers will be particularly pleased, as their role in potentially helping the wider system is firmly recognised, which one would hope will translate into better outcomes for other connectees.

This important review also coincides with other significant reforms across the board, from the Government’s Review of Electricity Market Arrangements (REMA), Ofgem’s Access & Forward-Looking Charges Review, and the work already done by ENA on DNO queue management, and by Ofgem on Targeted Charging Review, to name a few. Collectively these seek to make better use of the whole system, by taking a more holistic approach, and seeking to allocate costs, risks and benefits in a fairer manner.”

Action for now

NGESO has introduced a five-point plan to speed up the current connections queue:

 

Transmission Entry Capacity (TEC) Amnesty

Introduced in September 2022, the TEC Amnesty allows generators with connection agreements listed on the TEC register to terminate their agreement at minimal or no cost, or to reduce their TEC. Currently, when terminating a connection agreement or reducing their TEC, developers incur a charge to recover the cost of design work undertaken by the transmission operators (eg NGET or SHETL) and NGESO, and wasted capital expenditure. NGESO’s hope is that by introducing the TEC Amnesty to reduce this exposure for non-viable or borderline projects, this may relieve some pressure on the connections queue, with such projects either leaving completely or their capacity requirements being reduced. 

The expression of interest window was originally due to expire on 30 November 2022, but has been extended to the end of April 2023. Following a review of submissions during May and June, NGESO will contact customers on 31 July 2023 to confirm the outcome of each customer’s submission. Successful applicants will then be able to choose whether to proceed with the termination or TEC reduction. For unsuccessful applicants, queue management milestones may be added to their Connection Agreements (subject to the outcome of a code modification to formally introduce such milestones, CMP376). 

Updating background modelling assumptions

For NGESO’s network planning, it has to assume when making offers that most projects in the connections queue will connect to the network. The background modelling assumptions currently reflect this, with the effect that the total capacity of the connections queue is assumed to be greater (possibly significantly so) than the likely capacity that will actually be connected. Its analysis shows that only 30-40% of transmission projects in the queue come to fruition, but the queue operates on a first-come-first-served basis. This can result in viable projects being stuck in the queue behind projects that are less ready to connect. 

With this in mind, NGESO is proposing to update its background modelling assumptions to reflect current connection rates, reducing the assumption that all projects sitting in the connections queue will, in fact, connect. In particular, it is looking at the Construction Planning Assumptions (CPAs) and Battery Energy Storage Systems (BESS) modelling, seeking to review the methodology for determining Transmission Reinforcement Works (TRW) required as a result of connections, including BESS connections. The aim is that by applying revised assumptions, this could materially reduce the levels of TRW required, ultimately leading to earlier connection times.

Connecting storage quicker

Recognising the importance of energy storage to the overall management of the network, NGESO will change how storage is treated on the network to allow storage projects to connect faster, freeing up capacity for other projects. 

In particular, NGESO have recognised that they need to update their modelling of storage, including BESS projects, reflecting what they have learned from the recent acceleration in deployment, and their observation that batteries are acting in a way that increases network capacity at peak times. Indeed, this is one of the benefits of BESS that feels like it is currently being under-utilised due to them being stuck in the queue with “everyone else”, when everyone else may actually also be able to benefit from BESS getting online sooner to better manage network capacity.

NGESO therefore feel that they are able to treat BESS differently, giving them earlier connection dates and freeing up the capacity they hold, which in turn should accelerate other projects.

Updating connections terms – queue management

NGESO is updating the contractual terms for connections in an attempt to manage the queue more efficiently. This will be subject to Ofgem’s approval, but has the aim of ensuring projects that are progressing can connect, with those not progressing leaving the queue and opening up capacity.

A code modification to the CUSC has already been proposed to introduce milestones into NGESO connection agreements that reflect the progress of projects towards construction and commissioning, and introducing termination rights for NGESO if these milestones are not met (subject to certain exemptions and thresholds). This would formally introduce a new aptly named “Appendix Q” to connection agreements, and is being proposed under CUSC modification CMP376. This has been trialled in some connection agreements already, but would now be formally founded in the CUSC. 

Importantly, NGESO has stated its intention to introduce this to all connection agreements already in the queue, subject to Ofgem approval.

These milestones will need to be set in a manner that is workable for various projects, as will the thresholds/exemptions, to ensure that the right balance is struck between the need to ensure that the queue is not unduly blocking or delaying viable projects whilst also allowing otherwise ultimately viable projects to weather unforeseen or unfortunate events – for instance, if a milestone is missed (or at risk of being missed) due to subcontractor default or insolvency, the project developer is unlikely to have full recourse against its contractor in respect of the potential termination liabilities towards NGESO, let alone its other losses if the connection is lost or further delayed as a result of going to the back of the queue. If there is not a clear route to enable extensions of time to be granted to developers, where events/impacts of this nature, which are outside of a developer’s direct control, could jeopardise their key asset, then one might assume this will be reflected in the cost of capital.

Queue management is now a feature of most distribution network operator (DNO) offers, following the Energy Networks Association (ENA) Queue Management Guidance being published in 2019 (and updated subsequently). DNOs may come under increased pressure to enforce these termination rights, including by those further back in the queue.

Whilst introducing better queue management practices is a laudable objective, it needs to be balanced with the reality of how projects develop and ultimately get funded, and the unforeseeable but possible events that may occur.

Interim non-firm offers for BESS

Recognising that the other steps may not provide earlier connection dates for those already in the queue, the fifth point in the plan is for NGESO to offer an interim option for BESS projects to connect to the network sooner than they would if they were to wait for a firm connection. This comes with the caveat that those projects may be required to turn off more frequently to help manage system stress, and without being paid to do so initially.

Whilst constrained connections may raise red flags for renewables, it is possible that BESS assets could still be optimised effectively around constraints, as their model for generating revenue and the market dynamics that are in play during periods of constraint are quite different to those of non-dispatchable renewables.

Reviewing Transmission Reinforcement Works

Alongside the measures being put in place to create capacity and better manage the queue, a complete review of the TRW system for all contracted offers with a connection date after 1 January 2026 will be undertaken. The intention is to ‘rationalise’ the TRW for the contracted parties and identify options for BESS developers to connect earlier (with interim restrictions in place). 

If your project is in the transmission system queue, you should be aware that, once the review has been completed, connection dates for some projects may change, hopefully for the better.

Two steps to greater certainty

From 1 March 2023, a new two-step offer process will be implemented for new applications in England and Wales for developments. Offers for connections in Scotland will continue being issued as normal. The intention is to provide a greater degree of certainty for developers in the long-term, and will apply the new modelling and battery assumptions identified in the five-point plan. NGESO sees it as a necessary solution to manage the connections process in this interim period whilst the benefits of the TRW review can be updated into connection agreements.

So how will the new two-step process work?

Step One offer: an initial offer, on standard terms, which identifies a connection site and a completion date based on the then current TEC queue and current TRW required to connect. Detailed works, programme and charges will not be included in this initial offer, and no transmission works will be included and security requirements will be set at £0. However clauses will be included in the Bilateral Connection Agreement (BCA) and Construction Agreement (ConsAg) (which comprise the offer) with the effect that these details will be completed in the Step Two offer. This is to reflect that this is an initial offer that, if accepted, will be updated to identify the transmission works, programme, charges and connection site/point and any updated terms at Step Two.

Potential developers must then decide whether or not to accept the Step One offer. Within 9 months of the Step One initial offer being countersigned as accepted, a Step Two offer will be issued.

Step Two offer: this is a follow-up offer, following a meeting between NGESO and the customer in which an update will be given on the wider results from the completion of the wider review of the TRW required to enable the connection. The follow-up offer will be more akin to the connection offers that developers are used to seeing, with the relevant information on charges, securities and programme being completed. The hope is that, as a result of NGESO’s initiatives, it will be in a position to be able to offer better terms in terms of time and cost than it is currently able to. If customers do not accept the terms of the Step Two offer, they can decide not to sign it, at which point the Step One offer is terminated and the reconciled application fee is returned

This two-step process will run for 12 months while the complete review of the TRW (see below) is being progressed. It will apply to all “clock started” applications from 1 March 2023, meaning any new offers that are due out to customers from this date will be subject to it. As noted above, NGESO has indicated that the new two-step offer process will likely apply to any new modification applications (ModApps) that clock start on or after 1 March 2023, although this will depend on the status of the project and it meeting a number of key criteria, so each ModApp will be assessed on a case-by-case basis.

NGESO has published a helpful Frequently Asked Questions document on their website, which will be updated with questions and answers as they arise.

Connections Reform

The latest measures to have been announced are intended to improve access to the connections queue in the short-term. NGESO is continuing with its wider review of the challenges with the connections application process as part of its ongoing Connections Reform, which is due to conclude in the second quarter of 2025.

Source: NGESO, Connections Reform Project Timeline

 

Source: NGESO, Connection Reform Design Objectives