Government and Ofgem raise concerns over grid reforms

The annual application windows proposed by the Electricity System Operator (ESO) as part of long-term reforms to the connections process may not work for some types of projects, the government and energy regulator have cautioned.

The comments were included in the six-point Connections Action Plan issued by the Department for Energy Security and Net Zero (DESNZ) and Ofgem on Wednesday (22 November).

Earlier this year, the ESO held a consultation on potential long-term reforms to the connections process. Its preferred two-gate process would see applications submitted in annual windows, allowing the ESO to review them in batches.

Projects that passed this first gate would receive an offer comprising a firm capacity and site as well as a backstop connection date. However, their order in the connections queue would not be determined until they passed the second gate, marked by their submission of applications for planning consent.

The ESO said the batched processing of connection applications received in annual windows would enable greater coordination of network design as well as more efficient anticipatory investment.

DESNZ and Ofgem said they “see the merits” of this model and “support the aim of moving towards a system which enables the interaction between connections and network planning to be undertaken in a more holistic, strategic and coordinated way”.

However, they also raised concerns that a “single annual national window applying to all technology types may not be sufficient, potentially delaying projects where the window does not align with their timelines. For example, we have heard from demand customers the challenges that an annual connection window could cause for investment decisions”.

They said the ESO must consider the interactions of the proposed process with schemes such as the Capacity Market and Contracts for Difference. They acknowledged that the ESO is considering the benefits and feasibility of “more frequent and shorter duration windows” but said “further clarity is required on how the system, including interactions between different windows, could be adapted to meet such concerns”.

DESNZ and Ofgem said further clarity is also needed over the terms and conditions for passing each gate and how the ESO’s preferred model would interact in practice with distribution network connections that require transmission capacity.

They said the ESO also needs to consider how the connections process will interact with the wider strategic planning process, including the Regional Energy Strategic Planners, which Ofgem recently decided should be delivered by the Future System Operator that will replace the ESO next year.