Grid Connection Reform: The Latest Position

The Government, the National Energy System Operator (NESO) and Ofgem have all contributed to a considerable number of updates in recent months to bring about urgently needed grid connection reforms. The grid connection queue contains 739GW in capacity and over the last 5 years has grown tenfold in capacity and many of those projects, reportedly, do not have proper funding or necessary planning permission to progress.¹

In 2023/2024 NESO reportedly received over 1,700 applications which far exceeds what the system requires by even 2050.² These amongst many other reasons has prompted the most rapid change in grid connection reform for a decade. To help keep track, we have summarised some of the key changes from the last few months.

16 September 2024: Ofgem's open letter

Ofgem published an open letter setting out an overview of the next steps, including the progression of CMP434, CMP435, (see more below) CM095 and CM096 as well as its intentions to consult on the licence conditions for the electricity system operator, the transmission operator and the distribution operator. It set out the methodologies which NESO would use as part of its assessment of projects in the connections queue under Gate 2 namely: the Gate 2 Methodology, Project Designation Methodology and Connections Network Design Methodology (CNDM) and that NESO would consult later on the details.

27 November 2024: Ofgem consultation on changes to the licence conditions

Ofgem launched a consultation on the licence conditions to bring into effect the Clean Power 2030 Action Plan (CP2030AP) below. They said that they have tried to find a balance between a "prescriptive and non-prescriptive approach" for the Electricity System Operator licence, in how licensed parties will discharge their duties. Gate 1 and Gate 2 agreements have not been specifically defined to allow flexibility so will fall under "Bilateral Agreement and "Construction Agreement" definitions.

On the Electricity Transmission Standard Licences there would be an obligation for Transmission Owners and Offshore Transmission Owners to comply with the CNDM and support NESO with the "development and maintenance of the methodology". The consultation closed on 7 January 2025.

10 December 2024: NESO provides an update on the Strategic Alignment Criteria

NESO in response to stakeholder feedback, listed projects that would automatically pass the Strategic Alignment Criteria, if they can provide suitable evidence by the end of the Gate 2 to whole queue evidence submission window. These were:

• Where the planning consent application has been submitted before the final methodologies proposal is submitted to Ofgem and the project has secured planning consent by the end of the Gate 2 evidence submission window;
• Where a Government Contract for Difference has been awarded (Hydrogen Allocation Round projects need only meet the "readiness" element of the Gate 2 criteria);
• Where a Capacity Market contract has been awarded by NESO; or
• Where interconnector or Offshore Hybrid Asset projects that have been awarded an Ofgem cap and floor or merchant route regulatory approval.

You can read more about that update here.

20 December 2024: Clean Power 2030 Action Plan and more

Following the consultation on the methodologies on 5 November 2024 which closed on 2 December 2024, NESO finally published the CP2030AP which set out its vision for how it would reach its goal that "in a typical weather year, the 2030 power system [would] see clean sources produce at least as much power as Great Britain consumes in total over the whole year, and at least 95% of Great Britain's generation". Given the interaction between them, NESO also published its final draft modification reports for CMP434 and CMP435 and the final methodologies on the same day.

Connection methodologies

CNDM

The process is set out in the CNDM :

1. Gate 2 to Whole Queue: This will be a one-off activity where the Gate 2 criteria will be applied to the existing queue of projects (following the Gate 2 Methodology and the process set out in the CNDM ). The CNDM sets out that projects will be assessed against:
   1. The Gate 2 Readiness Criteria;
   2. The Gate 2 Strategic Alignment Criteria; and
   3. For technologies which are determined to be in-scope, projects will be assessed to align with the 2030 capacities and which will be 2035 capacities (as set out in the connections reform annex of the CP2030AP).
2. New applicants will have the option for applying for Gate 1, which will give the User an indicative connection date and connection point and capacity for eligible projects. Existing projects that failed to meet the Gate 2 criteria under the Gate 2 to Whole Queue phase will be given a Gate 1 offer via an agreement to vary.
3. Gate 2 assessment will be applied to new projects.

Gate 2 Criteria Methodology

The Gate 2 Criteria Methodology gives more detail on how projects will be assessed under Gate 2. To meet the Gate 2 Readiness Criteria outlined above they must meet the Land requirements or the Planning requirements:

Land

• Meet the minimum acreage requirements (or Offshore equivalent) – this would be 100% of the land which is required for the project and would be defined using the Energy Density Table (seen in CMP427 and the NESO guidance document);
• Provide an Original Red Line Boundary for each site on which the project is located – the applicant would need to show the Original Red Line Boundary of the site on which it is located, state the location, state the installed capacity and state the minimum land acreage for each technology; and
• Secure Land Rights – applicants could show this with an Option Agreement, evidence of existing ownership or an existing land lease.

Planning

• Submit a validated application for planning consent for projects where they are following the Development Consent Order (DCO) process.
• Meet the minimum acreage requirements and provide an original Red Line Boundary for the site on which the project is located (evidence to be provided to meet the Queue Management Milestone M2).

Projects must also meet the Gate 2 Strategic Alignment Criteria.The project must be:

• eligible for relevant 'protections' –

Protection Clause 1: Projects contracted to connect by end of 2026 – This will only be relevant to Gate 2 to Whole Queue assessment and not to the CMP435 Gated Application Window (for new applications under the connections reform process). This is met by the project evidencing a contracted connection date of 31st December 2026 or earlier and has met both Queue Management Milestones M2 and Queue Management Milestone M7.

Protection Clause 2a: Projects which are significantly progressed - This will only be relevant to Gate 2 to Whole Queue assessment and not to CMP435 Gated Application Window. This is met by the project evidencing planning consent (where submitted on or before 20 December 2024, a valid Contract for Difference (CfD), a Capacity Market contract (a CM Contract) or, for Interconnector or Offshore Hybrid Asset projects only, regulatory approval from Ofgem of either a Cap and Floor agreement or Merchant Interconnector approval.

Protection Clause 2b: Projects which are significantly progressed – This will not apply to assessment of initial and Gate to Whole Queue window projects. Projects must evidence a CfD, a CM contract or, for Interconnector or Offshore Hybrid Asset projects only, regulatory approval from Ofgem of either a Cap and Floor agreement or Merchant Interconnector approval.

Protection Clause 3: Projects which obtain planning consent after closure of the CMP435 Gated Application Window - This will not apply to assessment of initial and Gate to Whole Queue window projects. Projects must evidence meeting Queue Management Milestone M1, noting this must also show this was submitted to the Statutory Planning Authority prior to the closure of the CMP435 Gated Application Window and provide evidence of meeting the Queue Management Milestone M2.

The project must also be:

Users will be expected to comply with ongoing compliance requirements. For the "Land" route this includes ensuring that only 50% of the Installed Capacity is outside the Original Red Line Boundary and if it is not then the total Installed Capacity will be reduced accordingly. Under the "Planning" route a planning consent application must be made at the earliest of the queue management milestone M1 or M1 calculated forwards from the Gate 2 offer date to move from queue management milestone M3 to M1.

Project Designation Methodology

NESO has also outlined how it will designate projects under the reformed connections process. Designated projects form one of the options under the Strategic Alignment Criteria as well as they can be prioritised in the connection queue ahead of other projects in that Gate 2 tranche and be accelerated post Gate 2 should another project drop out of the connections queue.

NESO may designate a project that:

• Is critical to Security of Supply – where the project due to connect represents a material risk to NESO's security of supply objective being met efficiently and economically within a given year and the project would materially mitigate that risk and/or would deliver material benefits to GB consumers;
• Is critical to System Operation – where without that project represents a material risk to NESO maintaining the safe, reliable and efficient operation of the electricity transmission system within a given year and connecting the project would mitigate that risk;
• Materially reduces system and/or network constraints – where the project represents a material risk to NESO's management of constraints on the transmission system and/or network, risking significant additional cost within a given year;
• Is a new technology and/or highly innovative that are not in-scope of the CP2030AP and do not otherwise fit within scope of the Strategic Alignment Criteria – this would need to not be in-scope of CP2030AP and technology deemed by NESO to have met the Strategic Alignment Criteria or is a novel sub-type listed in the CP2030AP that has been successfully developed and demonstrated, is considered commercially viable and would provide benefit for GB customers (the technology must also have technology level readiness 8 or 9 as set out in this annex); and
• Has a very long lead time that may be needed beyond the 2035 capacities set out in the CP2030AP connection reform annex – projects must show the development lead times are in line with industry best practice and that the project delivers benefits to consumers. Connection dates will not before the end of 2035.

NESO has emphasised that it only envisages designating projects in exceptional circumstances, where a project meets the criteria detailed in this annex.

CP2030AP

CP2303AP sets out sweeping changes to meet its 2030 clean energy objectives (which you can read more generally about here). NESO has set out capacity ranges for projects that receive connection offers for projects in and before 2030, nationally and also broken down zonally and by technology type.

The in-scope technologies are listed out as Offshore/Onshore Wind, Solar, Nuclear, Low Carbon Dispatchable Power, Unabated Gas, LDES, Batteries (i.e. batteries that do not fall within the technical definition of LDES) and Interconnectors. As devised from projections set out in Future Energy Scenario (FES) 2024, the government has also set out projected needed capacity for out to 2035 as well.

Where a project exceeds the capacity ranges, projects will have the opportunity later if other projects drop out of the queue or if the capacity ranges are increased upwards. If there is undersupply in a particular zone NESO will first look to substitute viable projects of the same technology from adjacent, over-supplied zones. Where that cannot be done NESO will reserve capacity up to the top of the capacity range.

NESO also proposes that any project with a connection date in 2025 or 2026 should retain its connection date and that projects which are over the relevant capacity ranges for 2030 should be allowed to connect in the 2035 ranges where there is capacity.

NESO will provide more details in the Strategic Spatial Energy Plan (SSEP) in 2026 including the mix of technologies.

This will not apply to projects connecting to the distribution network that are below regional thresholds for TIAs (although note that NESO is proposing increasing the TIA threshold to 5MW).

CMP434

NESO published the Final Modification Report for approval by Ofgem. CMP434 is broadly designed to implement the new reformed connections process to new applications. This implements the methodologies, the bi-annual gates and the other elements of the new process into the Connection Use of System Code (CUSC). The CUSC Panel met on 20 December 2024 to discuss Workgroup Alternative CUSC Modifications (WACMs) and which should be implemented.

The Panel recommended unanimously that the Original Text and the following facilitated the Applicable CUSC Objectives:

WACMs3: This would codify a Capacity Reallocation Mechanism to allow terminated capacity to be offered to the next contracted project that has passed Gate 2 and is able to utilise the released capacity. NESO would no longer be able to utilise Project Designation or Connection Point and Capacity Reservation in respect of reallocating terminated capacity.

WACMs4: This codifies proposed restrictions on changes to project Red Line post-Gate 2.

WACMs6: This adds an obligation on NESO to implement a review of the new connections process with stakeholders to assess whether a code modification is required to codify the methodologies and guidance documents.

The Panel recommended by majority that the following WACMss better facilitated the Applicable CUSC Objectives under the CUSC:

WACMs1: Embedded Schemes which are covered by the Primary Process will be defined by capacity.

WACMs2: This creates an absolute obligation for DNOs and iDNOs to include all Embedded Projects that provide a valid Gate 2 compliance application and evidence submission within the Gated Application Window.

WACMs5: This is in line with the original proposal except it would remove Element 9: Project Designation (references to Project designation and Project Designation Methodology from Sections 11 and 17).

WACMs7: This would insert a pause for market self-regulation before the NESO/TO undertake the network assessment.

CMP435

Likewise, the Final Modification Report for CMP435 was also published. This applied the connections reforms to the projects in the existing queue.

The Panel voted that the Original proposal and WACMs1 better facilitated the Applicable CUSC Objectives:

WACMs1: The compliance check, including any revised Transmission Entry Capacity (TEC) or technology change requests, would be published and a two - four week pause would be implemented for Gate 2 qualified applicants to assess their position in the queue. Applicants could then submit an application for capacity advancement, keep their project or withdraw without penalty.

15 January 2025: NESO announces a pause on new grid applications

NESO also announced that given the backlog of applications already in place and the urgency of any reforms, should Ofgem approve its proposals more drastic changes needed to be made. NESO announced that from 29 January, it would not accept further applications for new connection applications (with further exceptions). See here for more details.

What next?

CP2030AP makes clear that more information regarding 2035 ranges will be set out in the SSEPP which is due to be published in 2026. The CNDM has made clear however that it would not apply retrospectively to previous applications.

In the meantime, Ofgem is due to approve, reject or suggest amendments to the proposals by end of Q1 this year. If approved, the relevant Code modifications are expected to be implemented by Q2.

Footnotes

1 p.65, Clean Power 2030 Action Plan, 20 December 2024 (Main Report).

2 p.1, Open letter on "pause" to connection queue, 15 January 2025.

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