ESO transmission amnesty to cost £40m

The cost of processing the Electricity System Operator’s (ESO) Transmission Entry Capacity amnesty will be in the region of £40 million, Utility Week can reveal.

Under the amnesty, developers of 52 projects will be offered the chance to give up their place in the grid connections queue without incurring hefty cancellation charges.

It comes after Ofgem approved plans by the ESO to waive cancellation charges for developers who expressed an interest in exiting their current contracts as part of the ESO’s Transmission Entry Capacity (TEC) amnesty.

The regulator confirmed to Utility Week that the combined cost of waiving the cancellation charges is in the region of £40 million. That sum will ultimately be recouped through customer bills via transmission network charges.

The decision is set out in a letter to the ESO’s electricity customer connections senior manager David Wildash from Ofgem deputy director for market design Jack Presley Abbott.

The letter adds: “Funding the TEC Amnesty will consequently have an impact on other customers’ charges in the relevant charging year, since the Cancellation Charge not being administered will mean corresponding costs will be recovered from all users of the transmission network via Transmission Network Use of System (TNUoS) charges.”

The letter adds that the decision to waive cancellation fees only applies to the 52 projects that have already expressed an interest in being removed from the queue.

The ESO will now go back to those project developers to confirm they are still interested in leaving the queue. Ofgem’s letter adds that the offer will stay on the table until 30 September 2024 after which the cancellation charge will be applied as normal.

The decision is expected to free up approximately 8GW of space in the connection queue for other projects. National Grid transmission president Alice Delahunty previously said that the uptake in the amnesty had been lower than originally expected.

The letter from Abbott reveals that there is currently over 340GW of new generation now holding connection agreements awaiting connection. It adds that 40% of all new generation capacity holding transmission connection agreements today have connection dates of 2030 or beyond (some as late as 2037).

The letter adds: “These impacts permeate into the distribution network, hinder the growth of new generation and ultimately slow Great Britain’s progress to net zero.

“There is a clear need to take action now to enable the optimisation of the connection queue to deliver improved connection dates and processes for customers, which we outlined in our open letter earlier this year.”

An ESO spokesperson added: “We welcome Ofgem’s support to enable the next steps of our Transmission Entry Capacity Amnesty.

“This has identified up to 8GW of projects in the connections queue that can be terminated and removed, allowing us to provide remaining customers with more timely connection offers.”

Battery storage

Ofgem has also announced its support for proposals by the Energy Networks Association (ENA) to limit energy storage/ battery projects which are blocking up the queue for energy producers connecting to the distribution network.

The regulator has backed a series of short-term improvements put forward by ENA on behalf of DNOs to reduce the proportion of ‘firm’ connections on the grid which require greater network investment and higher customer head of more fundamental reforms.

The ENA put forward the proposal in response to an unprecedented number of industrial energy storage projects applying to connect to the distribution network.

Britain has only 2GW connected to the distribution grid but the combined capacity of all storage projects holding distribution connection agreements is 53GW, with 30GW signed in 2022/23 alone.

However, ENA analysis shows average industrial-scale battery capacity utilisation is just 4.6% and 80% of contracted capacity sits idle for 95% of the time. ENA warns this problem will continue to grow as the number of connected and contracted-to-connect batteries increases.

The ENA states that the combination of battery volume; firm access rights; low utilisation and low operational predictability results in a large volume of network capacity which cannot be used by other customers. It claims that these network constraints are a barrier to connection of EV charging points, heat pumps and renewable generation.

It says the solution is not creating additional network capacity because batteries are already contracted but under-used. Instead it claims the best way to tackle queue constraints is to make better use of the battery capacity available.

The proposals approved by Ofgem include:

• Clarifying access rights for new electricity storage customers by tightening the definition of firm and non-firm to have a clear, consistent definition of future low-voltage needs, while rebalancing to non-firm contracts to free up capacity for other forms of generation on the grid.
• Greater commonality across DNOs in the application of diversity principles when establishing how much network capacity is needed to accommodate storage import requirements and the ability to curtail new storage customers as mitigation against the risks of doing so.
• Include Distribution Future Energy Scenario (DFES) forecast low voltage (LV) network demand and generation growth when assessing connection applications for all large customers, including storage.