Changes to the Grid Connection Queue Management Process: The Planning Perspective

In a previous LawNow, we discussed the introduction of a change to the queue management process for grid connections (pursuant to CUSC Modification Proposal 376, approved by Ofgem on 13 November 2023) and explained why this is so important in the context of the ‘backlog’ of projects waiting to connect to the grid.

This change was implemented on 27 November 2023, and impacted users should have been notified of the change by National Grid Electricity System Operator Limited (NGESO) by 11 December 2023.

In short, the new process gives NGESO greater powers (and in some cases an obligation) to terminate projects that are not progressing against progression milestones that will be introduced into their Construction Agreements. This is intended to make the best use of limited available network capacity and ensure that projects which are progressing are not hindered by projects which are delayed or stalled.

This represents a significant change to connection queue management and is part of a series of targeted reforms to manage the grid connection backlog, an ever increasing ‘queue’ of almost 400GW worth of capacity (mostly renewable energy or battery storage projects) waiting to connect to the grid.

Planning and land are important aspects of the reforms – some of the most fundamental project progression ‘milestones’ relate to the submission of a planning application and grant of planning permission for the relevant project as well as the securing of land rights. In this article, we take a closer look at these planning and land rights milestones.

Planning and Consenting Milestones

 There are questions as to what these milestones mean for projects that are preparing for or going through the planning process. A suite of new NGESO Guidance published on 27 November 2023 (the Guidance) seeks to provide practical advice, but some questions remain unanswered.

The introduction of ‘progression milestones’ is a core element of the new queue management process. As explained in our previous Law Now, these milestones will apply to new users and some existing users, and NGESO will use these milestones to measure the progress of a project and determine whether to terminate a User’s Construction Agreement.

From a planning perspective, Milestones 1 and 2 are the most pertinent, while Milestone 3 relates to land rights. As these are ‘Conditional Progression Milestones’, failure to comply following the conclusion of the milestone remedy period outlined in our previous LawNow will result in an obligation for NGESO to terminate the Construction Agreement, subject to certain exceptions. The Conditional Progression Milestones must also continue to be met on an ongoing basis.

Milestone 1 – Initiated Statutory Consents and Planning Permission 

• Milestone 1 requires statutory consents and planning permission to be ‘initiated’. To demonstrate that this milestone has been achieved, users will need to submit a planning application reference number which confirms that the application has been submitted and validated by the relevant authority.
• Where planning permission is not required, for example where the project is progressing under permitted development rights, a declaration from the User to this effect will be sufficient for Milestone 1.
• The Guidance does not specify how this milestone is satisfied in the context of an application for a Development Consent Order, as a DCO application is not ‘validated’ in the same way as a planning application is. Given that the evidential requirement under the CUSC is “submission of planning application to the relevant Statutory Authority”, we would interpret this requirement capable of being evidenced by formal ‘acceptance’ by PINS of the DCO application.

Milestone 2 – Secured Statutory Consents and Planning Permission

• Milestone 2 will be achieved once the User can demonstrate that the relevant statutory consents and/or planning permission have been secured.
• The evidential requirement under the CUSC is that the planning decision notice confirms planning permission has been granted and that this permission allows the User to meet the terms included in its Construction Agreement. The Guidance specifies that NGESO will not accept meeting minutes or outline planning permission in satisfaction of this milestone, so the necessity of securing full planning permission by the applicable milestone date will need to be factored into consenting strategies.
•  Another important feature of Milestone 2 (as with all of the Conditional Progression Milestones, as noted above) is that compliance is an ongoing requirement. This is presumably intended to manage the risks of expiry of the consent (which is usually between 3-7 years depending on the nature of the consent) or quashing of the consent as a result of a judicial review challenge.

Land Rights Milestone

 Milestone 3 – Secure Land Rights

This Milestone specifically relates to the land rights for the site of the installation, e.g. the power station (the Site). Evidence showing land rights have been secured for related connecting cabling is not sufficient to meet this Milestone. The date by which this milestone must be satisfied will be the earliest in the User’s milestone timetable (falling before the dates by which Milestones 1 and 2 must be satisfied). Again, this Milestone must continue to be satisfied on an ongoing basis after the milestone date.

Milestone 3 can be satisfied in a number of different ways, by the User either:

• Being the owner or tenant of the Site;
• Having entered into an agreement to lease or option to purchase the Site. The confidentiality provisions of any such agreement should be carefully considered to allow disclosure of its terms to NGESO to evidence satisfaction of the milestone; or
• Having entered into an exclusivity agreement for the Site. The inclusion of this option may well lead more projects to seek longer exclusivity terms, especially if the details of the precise land rights required for the project are not able to be decided at this stage.
• If the matter relates to an offshore Site, to satisfy this Milestone the User must have entered into an agreement with The Crown Estate for occupation/use of the seabed upon which the project will be located.

It is clear that the User itself (i.e. the entity that is party to the Construction Agreement and Bilateral Connection Agreement) must hold the requisite land rights referenced in the CUSC.

Timing

Timing is everything in terms of meeting each of these milestones. The deadlines are calculated backwards from the ‘Completion Date’ in the User’s Construction Agreement and are set by NGESO, save for projects that are less than two years from their Completion Date where deadlines are bilaterally agreed.

The means that the Milestone 1, 2 and 3 deadlines for most projects are non-negotiable and will be set by reference to the Completion Date either currently in the Construction Agreement or agreed as part of the first Modification Application: if a project does not consider the deadlines to be achievable based on the current Completion Date, the only option is to renegotiate the Completion Date as part of the relevant Modification Application implementing queue management provisions (unless the milestone can be achieved during the remedy period or an exception is available). 

Section 16.5 of the CUSC identifies certain “exceptional issues” outside the User’s control that may cause delay to the satisfaction of a User’s progression milestones and provides that NGESO has a discretion to extend the relevant progression milestones where such circumstances arise. For an exception to be granted, a User must submit evidence of the relevant circumstances to NGESO, and NGESO must be satisfied that the delay falls within the exceptions list.

Importantly, planning appeals and third party challenges to the project’s consent are included on the list of “exceptional issues” in CUSC 16.5. However, the User would have to evidence an actual appeal or challenge in order to persuade NGESO to grant an exception; we consider it unlikely to be possible to extend the milestone deadline on the basis of an anticipated refusal or challenge.

Planning implications

Many developers that hold a Construction Agreement will have already carried out or be in the process of carrying out optioneering work to determine the optimum siting and routing of their project infrastructure in reliance on the assumption that their project will connect to the grid at the geographic location identified in the Construction Agreement. This optioneering work involves detailed environmental and technical assessments and requires the investment of significant time and cost resources.

If such Construction Agreement is terminated pursuant to the new queue management process, unless the User is able to obtain new connection agreements which permit the project to connect to the grid in the same (or roughly the same) geographic location (which itself would be likely to come with significant consequences for connection costs and lead times), the developer risks losing potentially a huge amount of optioneering work along with their connection.

The new queue management process is intended to remove ‘stalled’ (or zombie) projects from the queue, but based on the detail and guidance that is available to date, there is also a risk to projects which are progressing through the optioneering and environmental assessment stage.

For any project, but particularly a DCO project, the submission of a planning application, i.e. Milestone 1, is the culmination of months or even years of work. However, there appears to be no avenue (unless one of the limited exceptions to termination is met) through which a developer could demonstrate that, although Milestone 1 has not been met, their project is progressing based on, for example, the amount of assessment work that has been done, or the completion of a public consultation process.

Similarly, as noted above in respect of Milestone 2, we would consider the grant of outline planning permission to be evidence of a well-progressed project, but this is explicitly stated by NGESO as not being sufficient to meet Milestone 2.

In order to manage the risk posed by not meeting Milestone 1 or 2, it is therefore extremely important to ensure that the Completion Date and associated milestones are suitable for your project. We would encourage all developers with Construction Agreements to carefully consider their ability to meet their milestones now. NGESO also held a number of queue management webinars in December 2023 and January 2024, the materials from which, as well as a Frequently Asked Questions Document, can be accessed on the queue management guidance web page mentioned above.

As the queue management process is implemented, it is likely that more guidance will emerge on how the process interacts with the existing planning regime and how the exceptions regime may apply in the case of protracted land negotiations. In particular, it would be helpful to understand how a project with outline planning permission can demonstrate compliance with Milestone 2 and whether, given the frontloaded nature of the DCO application processes, there is any avenue through which DCO projects could demonstrate progression to NGESO in circumstances where they have not technically met Milestone 1.

Article co-authored by Netty Yasin, Trainee Solicitor at CMS.