National Grid tells ESO connections reforms ‘fall short’

National Grid has warned that the connections queue will continue to grow unless the barriers to entry are made tougher.

The company’s transmission and distribution arms have both called for the requirements for entering the queue to be made more stringent than the Electricity System Operator (ESO) is currently proposing.

Proposed reforms to tackle the 700GW backlog of projects currently in the queue “fall short” of their aim and will “not sufficiently reduce and reorder the size of the pipeline”, National Grid Electricity Transmission (NGET) warns in a letter to Ofgem.

Furthermore, NGET cautions that the proposed criteria to entry for new projects is “too low” and will “not act as a strong enough deterrent to speculative applications in the future”.

NGET’s concerns come after the ESO issued an update on its proposals for reforming the connections process to prioritise viable projects that are ready to connect.

As part of the process – dubbed TMO4+ – existing and new projects will have to pass through two formal gates.

At the first gate, projects will be able to apply to the queue during an annual window, where they will receive an indicative connection date based on coordinated network design.

The second gate would then determine queue position for projects once certain criteria has been met, such as having land rights secured and planning permission submitted.

NGET’s submission adds that “the proposed criteria to meet both Gate 1 and Gate 2 is too low”.

It adds: “Additionally, the mix of technologies which will enter the pipeline and reach Gate 2 will be disproportionately weighted towards certain technologies, particularly storage, which are flexible on location and require less land, as opposed to reflecting what the energy system requires nor aligning to Government’s decarbonisation targets.”

To tackle this, NGET calls for TMO4+ to be “strengthened and complimented with further additional measures”.

In particular, NGET calls for “stronger requirements or restrictions” at Gate 2 “to immediately reduce the connections pipeline and then prevent the pipeline growing beyond what is realistically needed to meet future requirements”.

As an example, NGET suggests placing additional requirements at Gate 2 on a regional basis for customers to meet certain capacity or technology criteria in order to obtain a firm contract (aligned to the specific requirements to deliver a suitable energy mix for that region).

NGET also calls for further exploration of:

  • The implementation of a minimum threshold for a size of a connection at transmission
  • Cap and trade arrangements surrounding connections, which could prevent the pipeline growing further and support the most viable projects to secure earlier connection dates
  • Update of SQSS (the Security and Quality of Supply Standard) to better align to the future network required to enable net-zero
  • Consideration surrounding the treatment of strategic demand connections

NGET’s concerns about a low barrier to entry are echoed by National Grid’s distribution arm (NGED) in its separate response.

Within its submission, NGED says it doesn’t “believe that (TMO4+) alone will go far enough in delivering a solution that is sufficiently radical and enduring”.

It adds: “The current size of the pipeline necessitates fundamental change that goes above and beyond the current proposals. Implementing the right change is paramount in supporting the connection of new and existing contracted customers to drive network decarbonisation and value for end consumers.”

NGED calls for other options to be implemented alongside Gate 2 restrictions to “raise the bar further”.

This includes better qualifying what “shovel ready” actually means to clearly identify those projects that are purely speculative, and remove their firm connection dates, while improving confidence in network investment.

Like NGET, NGED also calls for “higher hurdles” to be implemented as part of the gated process. One example suggested by NGED was raising the cost of obtaining a distribution connection offer and applying a financial mechanism to holding a connection offer. NGED said this would mean that only financially committed projects apply for and hold a connection offer through to connection.

NGED has also supported the used of applying financial instruments as part of the Gate 2 criteria – something which the ESO has previously stated remained under review. NGED’s submission adds that this could be in the form of fees per MW, security deposits or cancellation fees.

“Alongside the higher hurdles set out above, this would create a better balance between the risks and costs compared with the rewards they receive once connected,” the submission adds.

Concerns that the barriers to entry are too low were also raised by several other respondents to Ofgem’s open letter which backed the ESO’s “ambitious” proposals.

SP Energy Networks’ (SPEN) submission states that the gates “do not act as any meaningful barrier to entry” and the TMO4+ proposals “do nothing” to address the number of connections applications being submitted.

Meanwhile, Octopus’ response states that relying on readiness criteria alone will not slow the growth of the queue on a long-term basis and instead called for the ESO to implement a “most value” criteria into the process after its initial rollout.

In response to the concerns, an an ESO spokesperson said: “Our TMO4+ ‘first ready, first connected’ proposals would see significant action across the whole of the queue, to drive quicker connections for viable projects by raising entry requirements, removing stalled projects and better utilising network capacity.

“We are continuing to develop our plans alongside Ofgem, Government and industry, with a programme of engagement with our stakeholders currently underway. This collaborative process will help to ensure that these enduring reforms best deliver on the objectives of the Connections Action Plan.”

Ofgem spokesperson added: “We asked for views. We’ve been sent views. There is unanimous backing the current system is not fit for purpose and needs overhauling – but the devil will be in the detail as the new one is designed.

“We’re listening to, engaging with and acting on what we’re being told from the frontline. That’s why we’re being open and transparent by putting these responses in public.

“ESO’s ambitious proposals are vital to meet demand for clean power and a net zero power system. We’ve set up a group from industry, trade bodies and policymakers to oversee the process – and as we promised are working with ESO on a detailed assessment of risks and benefits, with a clear plan for regulatory and operational rollout.”

Last week, Ofgem agreed to fast-track its decision making process in relation to four code modifications needed to rollout the proposed reforms to the connections queue.

It comes after the Electricity System Operator (ESO) warned that the queue could exceed 1,000GW if its recently outlined reforms are not treated with urgency.

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