The Transmission Entry Capacity amnesty has “run its course” after clearing 5GW of stalled projects from the connections queue that now stands at more than 400GW.
National Grid revealed the figures in its financial results for the six months to the end of September, which showed underlying operating profits across the group fell by 15% year-on-year to £1.8 billion.
The decrease primarily reflects reduced earnings from its US operations, although profits from its electricity distribution business in the UK, the Electricity System Operator (ESO) and its non-regulated business arm, National Grid Ventures, were also down.
Group revenues fell by 10% to £8.49 billion, while statutory pre-tax profits declined by 18% to £1.37 billion.
The Transmission Entry Capacity (TEC) amnesty was launched by the ESO in September last year and allowed stalled projects to withdraw from the TEC register at no cost or a reduced fee. The window in which projects could do so was originally due to close at the end November but was later extended to the end of April to due low uptake. The ESO had originally hoped to remove up to 8GW projects from the connections queue but in February it revealed it had so far received interest from just 5.5GW.
Speaking to Utility Week, National Grid’s chief financial officer Andy Agg said the amnesty has now “run its course” after rescinding connection agreements from 5GW of stalled projects. He said it will be up the Future System Operator (FSO), Ofgem or the government to decide whether to hold any further amnesties.
Agg emphasised that the amnesty is just one of a number of things National Grid has been doing to speed up connections times. Earlier this week, the company announced it had brought forward the connection dates for 10GW of batteries under a new approach that allows them to plug into the transmission network before non-essential upgrades are completed.
He also welcomed the recent passage into law of the government’s Energy Bill, which includes provisions for the establishment of the FSO: “We really needed that to unlock the process with the transfer of the system operator.”
The publicly-owned corporation will take on most of the existing roles and responsibilities of the ESO as well as multiple new functions, particularly in relation to the planning of energy networks and systems. The body is due be established at some point in 2024 although National Grid is hoping that the process can be completed within the first half of the year.
“We’re well progressed with the internal work to enable the separation from a systems and people perspective,” Agg remarked. “The works now starts in negotiating with the government in terms of value and that is really just getting going because the government wanted to wait until the bill was passed before we went to that stage.”
When asked by Utility Week what the ESO might be valued at, Agg said: “It’s a very small part financially of National Grid. We will want to ensure that we reach an appropriate settlement with the government for that value but it’s too early to start to comment on different perspectives on that.”
In the company’s half year results, underlying operating profit from National Grid Electricity Transmission rose by 16% to £656 million, mainly due to inflationary uplifts to its regulated revenues.
Capital investment by the division rose by 27% to £800 million due higher expenditure on connections and early investment in the 17 major projects fast-tracked by Ofgem under its Accelerated Strategic Transmission Investment (ASTI) programme. National Grid said it has made “good progress” on the ASTI projects, including signing joint ventures with Scottish Power and SSE for the Eastern Green Links 1 and 2 and launching the procurement process for its Great Grid Upgrade Partnership.
Last month, Ofgem announced plans to introduce a new regulatory regime for major grid upgrades modelled on the ASTI programme. The regulator said this regime would operate in parallel to the RIIO3 price controls, which would be streamlined and simplified for the next five-year regulatory period beginning in April 2026 for transmission and gas distribution.
“Broadly we were pleased with what we saw on that,” Agg told Utility Week. “The key messages we took from that is that they recognise there is a need to change, rather than revolutionise. They’re looking to streamline some of the processes that exist today and we like the idea of simplifying some of the processes that we need to undertake with them.”
Underlying operating profit from National Grid Electricity Distribution dipped by 3% to £579 million. Among other things, National Grid said earnings were “adversely impacted by reduced incentives opportunities” following the start of the ED2 price controls in April of this year.
National Grid Ventures saw a 15% fall in underlying operating profit to £219 million.