NGESO signals plans to widen scope of connection process reform

Background

In the push for the UK to meet its net zero targets, a significant number of generation and storage projects are seeking connection to the transmission network. NGESO (National Grid Electricity System Operator) estimated recently that the total connections queue (including transmission and distribution) could reach 800GW by the end of 2024. For projects seeking connection offers, this can now mean proposed connection dates in the late 2030s or beyond.

In December 2023, NGESO published a Final Recommendations Report following a consultation on various ways to improve the connection process. This was done in parallel with a number of short-term initiatives under NGESO’s ‘five-point plan’ which aimed at reducing the queue to connect and included measures such as a Transmission Entry Capacity (TEC) Amnesty (under which projects could terminate their agreement or reduce their TEC with minimal or no cost).

The Final Recommendations Report identified Target Model Option 4 (‘TMO4’) as the preferred route and NGESO set out an Implementation Plan proposing 1 January 2025 as the ‘go-live’ date for the reformed process.

April Update

In April 2024, NGESO provided an update on their progress against this Implementation Plan. In doing so, they identified that the pace of growth of the connection queue is outstripping any reduction achieved by measures such as the TEC Amnesty and they highlighted that if (as estimated), the queue reaches 800GW before the new process goes live, significant wait times may persist.

In response to this growth in the queue, NGESO now propose that the new TMO4 connections process will be applied to the existing queue and have clarified some of the outstanding features from the Final Recommendation Report (they have also upgraded the acronym accordingly: introducing ‘TMO4+’).

We explore what this means below.

TMO4+

Following a pre-application period, the new process involves two ‘Gates’ which projects must go through. The key features of these Gates are set out below.

Gate 1

Initial application submitted and assessed for competency (including a Letter of Authority).
Indicative connection point and indicative connection date provided.
User Commitment liabilities and securities do not apply.
Queue Management Milestones do not apply.
Projects can ‘self-serve’ data via a range of new/upgraded public tools from NGESO to track the queue status and identify any potential impact on their timelines.

Gate 2

Evidence to demonstrate meeting the Gate 2 criteria is provided by the project.
Projects assigned a queue position based on a ‘First Ready, First Connected’ approach.
Confirmed connection date and connection point allocated.
User Commitment liabilities and securities allocated.
Queue Management Milestones now apply.

The Gate 2 criteria have yet to be confirmed but indications from NGESO suggest that they may include:

secured land rights; and
a commitment to a date for submission of an application for planning consent.

NGESO have further indicated that there may be recognition of strategic priorities in Gate 2 criteria.

Existing offer holders

In their April update, NGESO clarified the proposal in respect of the existing queue.

They propose a window ahead of January 2025 during which existing projects can submit evidence to demonstrate that they have met the Gate 2 criteria.

For projects that meet the criteria, either the existing connection date would be confirmed or there would be an opportunity to seek an acceleration of this date (where capacity becomes available due to the queue reducing). These projects which pass Gate 2 would be allocated User Commitment liabilities and securities and would have Queue Management Milestones applied. Moving forward these milestones must be met or the project may risk being removed from the queue under the new NGESO powers (arising out of CMP376).

For projects that cannot demonstrate the Gate 2 criteria, the connection date and connection point in their existing construction agreements would become merely indicative. Where applicable, User Commitment liabilities and securities would no longer be required, and the projects would not be subject to any Queue Management Milestones.

The absence of a confirmed connection date and connection point for projects remaining in Gate 1 would leave them open to the risk that another project could be able to overtake them by demonstrating compliance with Gate 2 criteria. NGESO have acknowledged industry concerns that this could create inequality between technologies and favour smaller, agile and less land-intensive projects. In response, NGESO have indicated that the criteria for Gate 2 may vary slightly for different technologies, proposing that this would mean a more level playing field in the race to reach Gate 2 and secure a connection date. However, such variations would also put on the table the prospect of the Gate 2 criteria applying differently to different technologies and thereby preferring some technologies over others.

Future connection applications

For those looking ahead to future applications, the new process will form a key part of their approach to connection. NGESO propose that TMO4+ will be run in annual cycles with application windows during which projects can apply to pass Gate 1. It is then proposed that projects will be grouped together for Gate 2 assessment by NGESO regularly throughout the year.

Developers may wish to explore the implications of the new process on financing options and on their strategy and timeframe for seeking various permissions in respect of potential projects.

Distribution connection process

NGESO have indicated that the TMO4+ process is anticipated to affect embedded projects in the distribution network. For certain 'Large' projects the new application process would be directly applicable and such projects would be expected to follow TMO4+ closely. At present there is a definition of 'Large' derived from the Grid Code which applies different capacities in different parts of the country and is used to determine whether a distribution connected project must have a BEGA or a BELLA. The same thresholds are proposed here.

For small- to medium-sized projects, the impact of TMO4+ has yet to be clarified. NGESO have signalled that Distribution Network Operators (‘DNOs’) would be allocated Distribution Forecasted Transmission Capacity (‘DFTC’). The DNOs would then manage connection applications for prospective projects and allocate the DFTC to such projects accordingly.

What comes next

Before the NGESO proposals can come into effect, there are a number of code and licence modification processes that have to be followed. As part of these processes, Industry input will be crucial to inform the finalisation of the Gate 2 criteria.

Key questions still hang over how technology-agnostic the Gate 2 criteria should be, what carve-outs to the criteria are anticipated for strategic projects, and whether they will open the door to a strategic planning approach that prefers certain technologies in certain geographic areas. Further questions arise surrounding how TMO4+ would interact with the Capacity Market and other regulatory schemes, the approach to be taken for offshore assets, and the interface between TMO4+ and the multitude of small- to medium- sized projects seeking connection to the distribution network.

Whilst the required code and licence modifications are being worked through over the next few months, developers should be looking carefully at their project’s progress against any existing milestones whilst keeping a watchful eye on developments coming from NGESO about the detailed requirements of the Gate 2 criteria.

Therefore, if you are currently in the grid connection queue and have any queries about any of the points raised in this article and how they may impact your project, please feel free to reach out to our team (details below) to find out how we can assist you with preparing for TMO4+.

Contributor: William Massingberd-Mundy

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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