The taming of the queue: November 2023 update on electricity network development and connections reform

We return to our series on the scarcity of electricity grid connection capacity in areas across Great Britain as some further pertinent policy papers have been published. Among the developments noted in our August 2023 update were (i) the recommendations made by Electricity Networks Commissioner, Nick Winser CBE, on accelerating the delivery of new transmission infrastructure; and (ii) the commitment by Government and Ofgem to develop an action plan for reducing lead times for electricity network connections. Alongside the Autumn Statement, the Government published a “Transmission Acceleration Action Plan”, responding to the Electricity Networks Commissioner’s recommendations, and (together with Ofgem) the foreshadowed “Connections Action Plan”.

Transmission Acceleration Action Plan (TAAP)

The TAAP aims to speed up delivery of transmission network infrastructure so that new transmission infrastructure takes 7 years to deliver rather than around 12-14 years.  This is seen as a critical part of the delivery of net zero targets and long term energy security commitments, as well as delivering wide economic benefits. 

The Government has accepted the 43 interconnected recommendations made by the Electricity Networks Commissioner, with only minor differences in approach to the detail for a few of the recommendations.  As set out in our August 2023 update, the recommendations cover a range of interlinked areas, including the development of strategic spatial plans; standardisation of design standards; streamlining the regulatory approval process; planning reforms; a more strategic approach to supply chain and skills; benefits to communities hosting transmission infrastructure; outage planning; and the end-to-end process/governance.

In relation to the comments in the TAAP on the regulatory approval process, it is worth noting the linkage with Ofgem’s October decision on the Future Systems and Network Regulation review, in which Ofgem sets out its approach for new major transmission projects.  In short, Ofgem proposes to build on its Accelerated Strategic Transmission Investment (or ASTI) policy, with Ofgem’s scrutiny focused on reviewing implementation of effective procurement by the Transmission Owners (or TOs) and with the “needs case” being confirmed by the Future System Operator (or FSO) in the Centralised Strategic Network Plan (or CSNP). The shift in regulatory focus to enable strategic longer-term investment is also a key theme in the Government’s ongoing Smarter Regulation workstream (on which we intend to publish a separate article shortly).

A new ministerially chaired Transmission Acceleration Forum, made up of industry CEOs, regulators and the Electricity System Operator (or ESO), will track progress on the actions set out in the plan and monitor the impact on delivery of transmission infrastructure.  

Speeding up the process of transmission infrastructure delivery will of course speed up connections insofar as they remain dependent on the reinforcement of transmission capacity.  Other measures to speed up the connections process are covered in the Connections Action Plan. 

Connections Action Plan (CAP)

The CAP focuses on the connections process, comprising the processes and systems in place to provide a connection offer; the management of the pipeline of projects waiting to connect at both transmission and distribution levels; and the delivery of connections. It identifies the main drivers of connection delays as being:

1. the volume of projects holding grid connection agreements, due to factors including the relative ease for projects to gain a connection agreement, the “first-come, first-served” approach to connections and the ability of slow-moving projects to retain their connection agreements while relatively easily pushing back their connection dates, affecting those behind them in the connection queue;
2. the way in which the impacts of existing, offered and proposed connections are assessed by the ESO and network companies; and
3. the “need” for network reinforcement to be in place before the network can accommodate the connections. 

 The overriding objective is to realise electricity connection offers with shorter average connection dates, including (for transmission connections) offers with dates on average no more than six months beyond the requested date for viable, net-zero aligned projects. This is a highly ambitious target, given that connection delivery timescales of between 10 and 15 years are not uncommon at the moment.

The CAP recognises the actions currently being undertaken by the ESO (with its Five Point Plan) and the Energy Networks Association (ENA) (with its three-step plan), along with the longer-term connections reform that the ESO consulted on in June 2023 (see our August 2023 update for details). The CAP states that the Government and Ofgem support this longer-term reform and the aim of moving towards a system in which networks and connections are planned in a more holistic, strategic and coordinated way. Ahead of the ESO’s recommendations and implementation plan expected in December 2023, the CAP also provides some initial comments on the “gates and windows” approach favoured by the ESO in the June 2023 consultation paper, drawing attention in particular to some of the challenges that may be associated with requiring connection applications to be submitted within annual application windows.

The CAP sets out six key areas of action for Government, Ofgem, the ESO and the network companies to drive further action and significantly reduce connection timescales:

1. Raise entry requirements to increase the quality of projects applying for transmission connections and deter speculative connection applications.  Subject to Ofgem’s approval, the ESO will start requiring a landowner Letter of Authority to evidence permission from a landowner for a transmission network connection application to be accepted (similar to the requirement in the distribution context). Further measures for discouraging speculative applications are also under consideration, including increasing the up-front capital commitment required at the point of applying for a connection and introducing further restrictions on the transfer of Transmission Entry Capacity.
2. Remove stalled projects to release capacity for more viable projects, by means of measures such as:
   1. monitoring how effectively network companies are able to leverage (i) the existing queue management provisions in distribution connection arrangements and (ii) the new queue management regime being introduced into transmission connection arrangements by virtue of CUSC Modification Proposal 376 (see our recent article on this here);
   2. reviewing and improving enforcement of existing connection milestones at distribution level (alongside the ENA’s objective, endorsed by Ofgem, to introduce queue management provisions retrospectively into existing distribution connection arrangements, as noted in our August 2023 update); and
   3. considering introducing more stringent measures (over and above queue management) to free up stagnating capacity, such as providing disincentives for modifying connection arrangements and improving incentives to give up unutilised capacity.
3. Better utilise existing network capacity to reduce connection timelines by changing how the impact of connections is assessed by the ESO and network companies, beyond existing actions (such as the ESO’s review of the Construction Planning Assumptions used when making transmission connection offers, as noted in our August 2023 update), and enhance use of flexibility, including non-firm/flexible connections and commercial grid sharing. There is also an intent to consider the scope and role of contestable works (following on from Ofgem’s October 2023 open letter on regulatory arrangements for IDNOs) and for the ESO to review the scope of the “enabling” transmission reinforcement works considered to be necessary preconditions to a firm connection with a view to improving connections dates. 
4. Better allocate available network capacity to projects that are deemed sufficiently mature or important. As noted above, connection applications are currently managed by the ESO and network companies on a first-come-first-served basis, with each new connection request being considered (and offered network capacity – either existing or future) in light of those whose application was accepted earlier. Where more than one project is connecting in the same network area and the projects together cannot be delivered without network reinforcement, this creates a connection queue.  Typically, the ESO and network companies do not allow one customer in a queue to overtake another, unless the network reinforcement they are both dependent on is completed, or on a non-firm basis at the connection customer’s risk. The Government intends to move away from the existing approach to one that prioritises connections for certain projects based on other criteria, such as how well progressed a project is and how ready it is to connect to the grid, alignment of the project with system needs (in the context of a net zero system) and potentially the perceived strategic importance of the project. The CAP does not go into detail on the precise mechanism under which projects might be prioritised, perhaps as this is likely to be a challenging and controversial area, and the need to avoid breaches of network operators’ non-discrimination duties is repeatedly acknowledged.   
5. Improve data and processes and sharpen obligations and incentives on the ESO and network companies to:
   1. Give connection customers a better understanding of the condition of networks, to improve the quality of their connection applications and reduce speculative applications. This includes a renewed commitment to the much-anticipated development of a single integrated information platform for transmission and distribution network connections to demonstrate clearly to customers the likely costs, lead times and interdependencies of connecting in different geographical areas.
   2. Ensure network companies deliver timely connections and high-quality customer service, as well as acting consistently.  This will ensure that all customers receive the same high-quality service from the ESO and network companies wherever they are located, improve the interaction and consistency between transmission and distribution, and ensure that network companies deliver timely connections.  As part of this, Ofgem will undertake an end-to-end review of connections incentives, obligations and requirements on the ESO and networks companies. 
6. Develop longer term connections process models aligned with strategic planning and market reform to ensure they are integrated to deliver strategic outcomes for a timely and efficient transition to a net zero energy system. The number and scale of the overlapping policy initiatives underway in the energy context (such as the Review of Electricity Market Arrangements (REMA) (on which our latest update can be found here), NGESO’s longer-term connection reforms, the Government’s Smarter Regulation programme (on which we intend to publish a separate article shortly), Ofgem’s Future Systems and Network Regulation review, measures to increase the flexibility of the system to reduce the need for new transmission infrastructure, and the establishment of the FSO pursuant to the Energy Act 2023) means it is inevitable that each initiative will need to develop in step with others and adapt where necessary to keep pace.

These actions will be implemented under the oversight of a new Ofgem-chaired Connections Delivery Board, comprising both UK and devolved Scottish and Welsh Governments, the ESO, the ENA, network companies and connection customer representatives. The ESO would establish a Connections Process Advisory Group with an independent chair to, among other things, identify areas of code for change and raise quality proposals to ensure coordinated change across the transmission and distribution levels.  The current plan is, however, for the actions in the CAP to be delivered under the existing code governance framework, albeit that the CAP mentions the potential for legislation and/or a Significant Code Review process, should the necessary progress and coordination not be delivered. 

We will continue to follow developments on these actions and the matrix of interrelated energy policy workstreams. In the meantime, please contact your usual CMS contact for further information.