National Grid has been chastised by Ofgem over its implementation of a temporary two-step process for offering connections to the power grid.
The regulator said the process is now expected to bring little or no improvement in connection dates for the majority of customers. It has nevertheless granted a joint request by National Grid Electricity System Operator (ESO) and National Grid Electricity Transmission (NGET) to extend the deadline for providing revised offers to customers.
At the end of February last year, Ofgem approved proposals by National Grid to introduce a time-limited two-step connections process for the following 12 months.
In step one, customers would receive an interim offer within three months, comprising a position in the connections queue, a point of connection and a year by which they would be connected at the latest. There would be no details of the works that would be required to facilitate their connection and how much they would cost. Accordingly, customers would not be required to provide securities to cover the cost of these works.
In step two, customers would receive all the details they would normally receive as part of a connections offer. At this point, they would be able to leave the queue at no cost, but they would otherwise become liable to pay securities.
Ofgem said National Grid would be required to provide revised connection offers to customers within 12 months of the new process being approved (i.e. by 1 March 2024), except to those who submitted an application within the last three months (27 November 2023 to 29 February 2024) who would be entitled to receive a detailed offer within three months of applying.
The temporary two-step process was intended to facilitate the introduction of new Construction Planning Assumptions (CPAs) with more realistic attrition rates for projects in the connections queue, as well as a new approach to modelling the impact of batteries on the transmission network and updated assumptions around the transmission reinforcement works required to accommodate connections. Under the old CPAs, most projects in the queue were assumed to connect to the power grid when the real rate is just 30 to 40%.
The two transmission owners in Scotland – SP Energy Networks and Scottish and Southern Electricity Networks – did not ask to implement a similar process for connections to their networks.
Earlier this month, the ESO and NGET sent a joint request to Ofgem for a three-month extension to the main deadline for providing revised offers to customers under the temporary two-step process. They also asked for the clock start for applications received within the last three months to be reset to 1 March 2024.
Ofgem has now approved the request, saying it recognises that the “unprecedented volume of new applications” has limited the potential efficacy of the process. The ESO and NGET have received more than 500 applications through the temporary process, representing 150GW of capacity and a third of the total transmission pipeline in Great Britain.
Despite the new CPAs, the regulator said this surge in applications is “driving connection agreements to include provisions for significant new reinforcement works,” including substations and overhead lines (OHLs), that go well beyond those expected to be recommended by the ESO in its second transitional Centralised Strategic Network Plan (CSNP).
If revised connection offers were produced based on this level of reinforcement, the ESO and NGET said the majority would have a connection date later than the backstop in the initial offer, while the rest would bring no improvement. “This is significantly below our expectations of what the two-step process would deliver,” Ofgem remarked.
The ESO and NGET requested the extension to enable them to conduct a review of the OHL works that were set to be included in revised offers. Any of these works that are not recommended in the second transitional CSNP will be removed from the offers.
They said this review should enable 60% of customers to receive a revised offer with a connection date that is better than, or aligned with, their initial offer. However, the remaining 40% are expected to see their connection dates delayed when compared to their initial offer.
Ofgem said some revised offers required “minimal review and re-work” meaning they would start to be issued before 1 March. The regulator said it expects National Grid to “take reasonable steps to issue offers to customers as they are ready, rather than holding back offers until 1 June 2024.” It said connection offers received after 27 November 2023 will be reviewed sequentially following the issuance of revised offers for prior applications.
Despite taking the “pragmatic” decision to extend the deadlines, Ofgem expressed “disappointment” in the performance of the ESO and NGET with regards to the implementation of the two-step process so far. The regulator stressed that if the ESO and NGET do not meet their new deadlines, they will be considered to be in breech of their licence obligations and may be subject to enforcement action. It said its approval is based on “the firm expectation that no further extensions will be required or requested”.
The ESO is normally required to issue connection offers within three months of receiving an application.
Ofgem said the ESO and NGET will report their progress to the regulator on a weekly basis, starting on 8 March. If at any point in the three-month extension they do not believe that their revised offers will deliver the same or improved connection dates for at least 60% of customers, they will be required to notify Ofgem “without delay.”
The regulator noted that it has committed to undertake a “full end-to-end” review of incentives, obligations and requirements as part of its Connections Action Plan. Among other things, Ofgem said the review will be informed by National Grid’s performance in delivering the two-step connections process.