If the UK Government is to achieve its commitment of delivering a net zero electricity network by 2035, this will require an improved and faster grid connections process. National Grid, the Electricity System Operator (ESO), has announced various initiatives to address a situation that can occur under the current process, where viable projects are held back by stalled or slow moving projects ahead of them in the queue. If you have a project that has stalled, or if you are behind a stalled or slow moving project in the queue, these initiatives could be of interest to you.
Background to the queue
The Transmission Entry Capacity (TEC) register sets out the ‘queue’ for all projects which have applied for connections to the electricity transmission network. Currently, projects are placed in this queue based on the date they accept their connection offers and the ESO is not able to optimise the use of available network capacity by allowing projects with a later acceptance date to ‘overtake’ slower projects ahead of them in the queue. This, coupled with the significant volume of projects in the queue (over 310GW of contracted projects as of September 2022) and the widespread need for network reinforcements, means too often, projects are left waiting to connect or may even have their connection dates delayed. The ESO’s solutions to this problem include the current live TEC Amnesty and the adoption of a new queue management mechanism.
TEC Amnesty
From 1 October 2022 to 30 April 2023, the ESO, in partnership with the transmission owners, is holding a ‘TEC Amnesty’ to allow projects which are unable to meet their connection requirements to withdraw from the TEC register (i.e. to terminate their agreement with the ESO), or to reduce their TEC, at a reduced or zero cost. The intention is that this TEC Amnesty will speed up connections by removing stalled projects from the queue. The closing date for applications was extended from 30 November 2022 to 30 April 2023, following engagement with industry and in order to enable progress with ongoing related activities including implementation of CMP376 (discussed in more detail below), conclusion of the latest Capacity Market auction, completion of the interconnector cap and floor review, completion of the Holistic Network Design (HND) 1 contract update, and progression of the Construction and Planning Assumptions optimisation exercise. The ESO has confirmed that applicants who submitted expressions of interest on or before the original deadline of 30 November 2022 will receive responses to their applications on the originally proposed date of 1 February 2023, with applicants who submit expressions of interest between 1 December 2022 and 30 April 2023 set to receive responses on 31 July 2023.
The TEC Amnesty provides an opportunity for projects to leave the TEC queue with little or no penalty (i.e. cancellation charges) and in time to avoid being subject to the queue management milestones expected to be implemented under CUSC modification CMP376 (see below). The ESO has confirmed that the TEC Amnesty is ‘the last opportunity’ for projects to do so, and that projects whose applications under the TEC Amnesty are not successful may still be subject to queue management milestones following the implementation of CMP376.
CMP376: milestones for queue management
CMP376 is currently progressing through the Connection and Use of System Code (CUSC) modification proposal process. CMP376 (if approved) will allow the ESO to incorporate specific queue management milestones into connection offers and allow the ESO to terminate an offer where those milestones are not met. Proposals include milestones in respect of initiating planning consent and securing planning consent and land rights etc. The ESO’s current thinking is that milestones should be set working backwards from the project’s connection date and that termination will apply if evidence of satisfaction of a milestone is not provided within 60 days of a missed milestone, unless certain exceptions apply, e.g. force majeure.
Implementation of CMP376
Despite the fact that the CUSC modification process for CMP376 was still ongoing and Ofgem’s approval had not yet been obtained, the ESO began including queue management milestones in offers for new connections and modification offers for a short period from 1 July 2021. In the face of a backlash from developers, the ESO then published an open letter in February 2022 in which it recognised it had been overeager and halted the inclusion of queue management milestones in any new offers until the outcome of the CMP376 CUSC modification process was known. Those projects which had accepted offers with queue management milestones included were also given assurances that those milestones would not be enforced and would be removed at the earliest opportunity.
What does this mean for projects?
As of today’s date, implementation of the queue management mechanism is subject to the completion of the CUSC modification process and final approval from Ofgem. Until then, new connection offers are not required to have queue management milestones included (nor are projects required to comply with any queue management milestones previously included in their connection agreements due to the ESO’s over-eagerness). The ESO’s current proposal is that only new applications and modification applications made after the implementation date of CMP376 will have queue management milestones included, but the Workgroup is also considering having all live agreements moved onto the new arrangements regardless of whether they have applied for a modification or not. The issue of which agreements should have the queue management mechanism incorporated into them will be resolved during the course of the CUSC modification process.
The ESO’s proposed timeline for approval of CMP376 anticipates the completion of work groups and issue of a work group report by 16 February 2023, with consultation and subsequent issue of the final draft modification report by 23 March 2023. It is then anticipated that the final report will be approved by the ESO and issued to Ofgem by 12 April 2023.
If you have a project at conception stage or an in-flight project with a completion date after mid-2023, we recommend you keep an eye on the outcome of the CMP376 CUSC modification process and consider how you will factor queue management risk into your project’s risk profile.
If you require any support or advice on the implications of these initiatives, please get in touch with Jessica Sutherland, Senior Solicitor in the Shepherd and Wedderburn clean energy team or your usual Shepherd and Wedderburn contact.