Connections queue blocked by 62GW of ‘phantom’ projects

The connections queue for the transmission network contains around 62GW of “phantom” projects that are due to be connected by 2029 but still remain in the scoping phase and may not have secured land rights or applied for planning permission.

Centrica said these projects account for roughly a fifth of the 371GW of projects in the Transmission Entry Capacity register and more than a half of the 114GW worth of projects due to be connected before 2029.

The figures are contained in a new report commissioned by the company, which has urged Ofgem to give the Electricity System Operator (ESO) the powers to remove such projects from the connections queue.

The report was produced by the consultancy Charles Rivers Associates in support of the proposed Connection and Use of System Code (CUSC) modification CMP376.

The modification was proposed by the ESO in July 2021 and would introduce a new queue management system, whereby projects that failed to meet a series of development milestones – securing land rights, applying for and securing planning permission, and agreeing a construction plan – could have their connection agreements terminated if the cumulative delays exceeded a threshold. Ofgem is due to make a decision on whether to approve the modification by 10 November.

The original proposal would not apply the new queue management system to existing projects unless they sought to modify their connection agreement, but the report argues that this would be a mistake.

Under the current first-come, first-served system, the report said the scarcity of timely connections and the limited cost of securing a place in the queue, means speculative projects are able to accrue “unearned value.” It says the failure to apply the new queue management system to existing projects would “artificially inflate” their value, “unintentionally benefitting developers who have hoarded connection capacity with unviable projects”.

It says developers may be able to extract this value as profit by selling on their connection agreements, ultimately raising costs for consumers.

Along with cancellation charges, the report says this unearned value creates a disincentive for stalled or speculative projects to exit the queue.

The report therefore urges Ofgem to adopt an alternative version of CMP376 designated WACM7, which would apply the new queue management system to existing connection agreements if the contracted completion date is more than two years away, or the contracted completion date is less than two years away but the project is not progressing. Multiple other versions of the modification would similarly apply to existing projects, but also have other variations from the original proposal.

Based on analysis of the current queue, the report estimates that the approval of WACM7 would unlock 12.3GW of connection capacity.

Chris O’Shea, chief executive of Centrica, said: “In recent years energy security has rightly moved up the agenda as countries look to secure supplies and drive the transition to net zero. That’s why it defies belief that the queue for new, green energy connections is blocked by ‘phantom’ power projects.

“Not only do these ‘developers’ not have the money to develop, but many also don’t even have planning permission or land rights – they’re gambling that holding a space in the queue will make them rich.”

He continued: “The system was created for a different time, when a small number of large projects were connected each year. Our current approach is not fit for purpose and needs urgent reform.

“Thankfully Ofgem has now recognised the need for action but every day we wait for action is costing consumers money. Urgently introducing an industry rule change and applying it to the current queue, so that existing phantom projects lose their place when they miss milestones, would show that Ofgem were helping to reduce costs for consumers, to drive the energy transition and to improve the UK’s energy security.”