ESO connections proposal on securing land rights ‘may not be that effective’

Proposals by National Grid Electricity System Operator (ESO) on securing land rights as part of the connections process “may not be that effective in practice”, a legal expert has warned.

As part of ESO’s revised proposals for reforming the connections 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 the queue position for projects once certain criteria has been met, such as having land rights secured and planning permission submitted.

Yet Michael Bray, a real estate partner at Freeths, told Utility Week that while the industry is “generally supportive of the purpose behind TM04+”, the proposals on securing land rights for Gate 2 may not be effective enough.

“Options can vary significantly in form and content – it is possible for example not to fully negotiate the form of lease to be entered into, which may mean the option takes effect in law as an unenforceable agreement to agree,” said Bray.

Some applicants, he added, may take “very ‘loose’ and short form options” which may potentially have details which are yet to be agreed and conditions to be met, with due diligence and viability to be undertaken and considered, in order to confirm that an option is in place and secure and maintain their Gate 2 offers.

Furthermore, he warned that the option for lease for the generation or storage plant and equipment is “only part of the picture” and that it is likely that further land rights will be needed to lay cables and infrastructure over third party land in order to facilitate the grid connection.

“An otherwise viable project may therefore still be subject to third party ransom or technical issues,” he added.

“A well-developed option will still need to be put in place for a scheme to be viable and bankable in the longer term. Any applicants taking this approach will need to ensure the options negotiated for grid queue purposes include a mechanism to re-engage with the landowner to fully flesh out a proper land option agreement later.”

Last month, the ESO warned that the queue could exceed 1,000GW if its reforms are not treated with urgency.

As such, Ofgem agreed to fast-track its decision making process in relation to four code modifications needed to rollout the proposed reforms.

Land referencing service TerraQuest has also issued a warning that efforts to speed up grid connections risk progressing more slowly than necessary because of delays caused by uncertainty over the status and ownership of land.

Tony Pratt, head of technical services at TerraQuest, said while HM Land Registry in principle holds a full record of land ownership in the UK, a single check at the start of a project is unlikely to be sufficient in the context of complex multi-year projects, where land ownership can change frequently and even be ambiguous or disputed.

“Land referencing needs to be an active and ongoing process, involving detailed research into the ownership and restrictions on the use of all land involved in a project,” said Pratt.

He added: “Without comprehensive and up-to-date intelligence about the status of land potentially affected by a project, there is a real risk of unnecessary delays in acquiring or gaining rights over land. When multiplied by potentially many hundreds of plots of land, the prospects of encountering costly issues rises substantially. This is a significant area of risk, given the urgent need to increase the speed of delivery of new grid connections.”

An ESO spokesperson said: “To deliver more clean, secure power to homes and businesses across Great Britain, the connections process has to become fit for purpose. In April, the ESO published our proposed model for enduring connections reform which would see significant action across the whole of the current queue, enabling earlier connection dates for viable projects which meet their milestones.

“These ‘first ready, first connected’ proposals are currently going through the relevant open governance processes, where we are receiving input and feedback from a variety of stakeholders. After a consultation period, we will be submitting our final report to the regulator for their decision. This is complex, and we are determined to get it right.”

Retailers, network operators and project developers have all now had their say on the TMO4+ proposal, raising a variety of concerns with the overhaul tabled by the ESO. Click here to read Utility Week’s breakdown of concerns raised.