UK: Connections, Reform and Clean Power

Clean Power 2030

In its CP30 advice, NESO recognises that achieving clean power is challenging, but the ambition can be met by 2030.  The report highlights two “clean power pathways”:

• Further Flex and Renewables - which focuses on 50GW of offshore wind and no new dispatchable plants; and
• New Dispatch – with 43GW of offshore wind and new dispatchable plants, using either hydrogen from low carbon sources or carbon capture and storage.

These two clean power pathways are intended to ensure that Great Britain becomes a net exporter of power, and reduces the proportion of unabated gas generation below 5%.  Both pathways centre on offshore wind as the “bedrock” of the new system, with NESO’s advice being that the clean power system must be based on offshore wind, as it is the only clean option available at the scale required by 2030.  Other technologies, such as nuclear, will play an important role in the future delivery of clean power, given their reliability and non-reliance on weather conditions. 

Recognising the importance of security and flexibility, the pathways also highlight the benefits of battery capacity, which needs to increase to around 23-27GW by 2030.  Although there are plenty of projects in the pipeline, delivery of these projects relies on (and is at risk of) the reforms to the connections queue, as well as resolution of planning issues and the availability of revenue opportunities.  NESO highlights that short-duration BESS is the starkest example of over-supplied technology based on CP30-alignment.  For long-duration energy storage (LDES), however, the pipeline for options ready to deploy by 2030 is limited.  Deployment of LDES technologies has recently been the subject of a Government consultation response (see ES Briefing), and further information is expected on the detail of the LDES cap and floor regime during Winter 2024.

Alongside the challenges of managing demand and supply, balancing flexibility with security, and delivering a connections reform that will quicken the connections queue, there are operability issues that will also need to be addressed to ensure the system can be operated with zero carbon.  NESO advises that changes within the Control Centre and support functions are needed to enable the operation of a clean power system in 2030, with a need for further investment in digitalisation and artificial intelligence to realise this.

Addressing some of the barriers faced by the energy industry, NESO also highlights some of the key enablers for CP30, including greater investment, planning and consenting, and of course connections reform.  It is now with the UK Government to finalise the CP30 plan, taking account of NESO’s advice, which is expected later this year.

Support from Ofgem and DESNZ

In an open letter to industry, also published on 5 November 2024, the Department for Energy Security and Net Zero (DESNZ) and Ofgem have demonstrated their support for the alignment of strategic planning with connections reform.  The letter highlights the need for certainty, with strategic plans setting out decisions about the different technologies needed in different geographical locations, as well as the importance of ensuring the system is flexible enough to enable competition and respond to future needs or changes. 

Ensuring demand users can connect to the network will require investment in data centres and gigafactories, the electrification of industrial centres, road transport and ports, and the building of new housing, prisons or hospitals.

With much of the current connections reform focus being on transmission connections, DESNZ and Ofgem recognise the importance of not letting reform of distribution connections “fall by the wayside”, and ensuring the new connections process is implemented consistently by all network companies.

Consultation on connection methodologies

NESO aims to align the connections process to the government’s Clean Power 2030 Action Plan, and is consulting on its proposals, which include:

• the Connections Network Design Methodology (CNDM) – this will include critical detail of how the new “CP30-aligned” queue will be formed out of those projects that pass Gate 2, and will be based on various “pots” divided between transmission / distribution, technology and location, and appears likely to give priority to projects based on planning status (creating a de facto second Gate 2 criterion for certain pots). The exact capacity for each pot (eg transmission connected BESS in Norfolk) is only expected to come once Government finalises CP30, and NESO are still considering how they might provide additional data to enable developers to assess their relative odds of obtaining a coveted position in the queue (now that deeper analysis of other projects in their pot will be required);
• the Gate 2 Criteria Methodology – this will include the detailed requirements for passing Gate 2, which is now land rights or planning (if via DCO), and requirements for “strategic alignment” (essentially CP30 alignment, as above, or designation, as below). Heads of terms and exclusivity are definitely still out; options, leases or ownership are still in; the position is still unclear on the likes of conditional sale and purchase agreements for land;
• the Project Designation Methodology – this will include more details of the pre-requisites for a project to be “designated” allowing it to essentially avoid having to be CP30-aligned in order to secure a firm queue position post-Gate 2.

In its consultation document, NESO outlines a draft plan demonstrating the key milestones to implement the connections reform process, indicating that a decision on the methodologies and the required modifications to industry codes will be made Q1 2025 (subject to change).  Implementation of the connections reform is expected to begin from Q2 2025 with Gate 1 projects being issued offers.

For those interested in responding, the consultation closes at 5pm on 2 December 2024.

Capacity Commitment Fee

Another key aspect currently being consulted on is the proposal to introduce a “Capacity Commitment Fee” (CCF) of £20,000/MW, which would need to be secured (in the same way as Cancellation Charges) once a project accepts its Gate 2 offer.  NESO has a Call for Input out currently on this, seeking industry input on the need / quantum in light of other aspects of the reforms.  The details were published in the 11 October 2024 presentation in the Transmission Charging Methodologies Forum and CUSC Issues Steering Group.  To avoid “excessive security requirements”, the existing Cancellation Charge Secured Amount will be net off from the CCF, with developers being liable for security of the greater amount between the two cancellation charges.

NESO is proposing that it would be able to draw on the security if a developer, having accepted its Gate 2 offer, leaves the queue before achieving User Progression Milestone 7: Project Commitment, fails to deliver one of its milestones, or reduces its original transmission entry or developer capacity.  Think of it like a minimum security requirement until FID, at which point Users would switch to cost-reflective Cancellation Charges.

Currently it appears this is only envisaged for generation connections (not demand-only, which is on Final Sums methodology, rather than Cancellation Charge methodology under Section 15 of the CUSC).

The deadline for the Call for Input is 22 November 2024.  This proposal will then be considered further by way of a code modification.

How do I keep track of the developments?

The Connections Reform developments are coming thick and fast, with numerous consultations now in flight, and we know that trying to keep track of it all can be challenging.  If you want to know more, or have any particular concerns, get in touch with a member of our team who will be able to help you navigate your way through the latest developments.

For more information on the proposed changes, catch up on our latest webinar: