Ofgem has fast tracked a proposal to prevent deposits being requested from connecting customers when they relate to strategic transmission works approved by the regulator.
The modification to the System Operator Transmission Owner Code (STC) was proposed by SSE due to concerns that the high cost of securities associated with strategic grid upgrades are preventing viable projects from connecting to the transmission network.
Parties seeking to connect to the transmission network are required to pay securities to cover some or all of the transmission owner’s costs in the event that they do not proceed with their connection.
SSE said this is no longer appropriate when these deposits relate to strategic works for which funding has been approved by the regulator. Ofgem said the company had provided anecdotal evidence that 19 generators with a combined capacity of 0.2GW were being deterred from seeking connections under one transmission owner because of security requests relating to strategic works.
The proposal document highlighted the example of a proposed high voltage direct current link to the Orkney Islands. SSE suggested that the current security requirements relating to the link are holding up community-owned wind projects on the Scottish archipelago.
Under the code modification CM098, customers would still be required to provide securities for strategic grid upgrades until they receive regulatory approval but at this point the deposits collected would be returned to customers.
In line with the recommendation of the STC panel, Ofgem has approved SSE’s request for the modification to be treated with urgency.
Ofgem said there are likely to be more customers affected by this issue than the 19 generators cited by SSE “given the scale of strategic transmission investment planned over the course of the decade.”
The regulator said the code modification seeks to address an “immediate issue which, if not urgently considered, has the potential to cause significant commercial impacts to connecting users”. It said early clarity over security arrangements will prevent “unnecessary delays or increased costs owing to a perceived but unknown risk.”
Ofgem said it will make a final decision on the proposal by 31 May 2024.