Grid Connection Reform Proposals Backed by Ofgem in Energy Transition Efforts
In a significant move to support the UK's clean energy ambitions, Ofgem has expressed its backing for the Electricity System Operator's (ESO) plans to reform the grid connection process for energy generation projects.
The proposed reforms, which aim to streamline the system and prioritise renewable projects, offer several key benefits. One of the most significant advantages is faster and more efficient queue management. The reforms replace the old "first come, first served" connections model with an ordered queue and set application windows, aiming to reduce connection delays that previously pushed some projects’ grid access to the 2040s. This new system is designed to manage the large backlog of projects (around 750 GW) and prioritise those meeting specific Gate 2 criteria to improve certainty and order in queue allocation.
Another key benefit is the unlocking of additional grid connection capacity. The reforms could free up more than 400 GW of capacity, significantly accelerating the deployment of new renewable projects as well as energy-intensive sectors like data centres that depend on reliable energy access.
The reforms are also expected to increase investment confidence, as they reduce waiting times and create a more transparent and structured application process. This encourages investment in renewables, supporting the government's Clean Power 2030 Action Plan.
The reforms align with large government investments to expand grid capacity, facilitating the UK’s decarbonisation and AI economic growth strategies. However, the reforms also introduce new procedural hurdles and transition risks that must be carefully managed.
One potential risk is the complexity and new criteria that applicants must meet to secure a firm queue position. Those failing to meet these criteria may only obtain indicative offers, which could create uncertainty or disadvantage smaller or less mature projects.
Another concern is the potential delays during the transition to the new queuing system and application windows, which may initially slow down new applications or complicate processes until stakeholders adapt.
Managing the huge backlog of overly optimistic applications and ensuring grid capacity is fully utilized will be complex. The reformed process, called "first ready, first connected," will consist of two gates to entry into the connections queue, with the second requiring land rights and a date of submission for the planning application.
The Market Gateway platform, which has procured over 17 gigawatt-hours of flexibility services since its inception in 2023, will continue to operate on an auction clearing basis.
In addition to the grid connection reforms, there is growing interest in co-location, which involves developing multiple generation projects or combining different technology types at the same grid connection point. Battery storage currently forms the core of co-location, but only 12% of onshore wind and solar farms in the UK are co-located with battery storage or hydrogen electrolysers.
RenewableUK, in a recent report, has highlighted the importance of co-location in accelerating an integrated energy system. However, regulation and policy are currently hindering the growth of co-location projects.
To address this, National Grid has partnered with Electron to merge flexibility market platforms, aiming to increase interoperability between UK flexibility markets. The collaboration also aims to increase engagement across the distribution network and promote low prices for consumers.
Securing planning permission and grid connection for storage assets can be a long and costly process, with storage assets currently facing a delay until 2030 to connect to the grid. However, FSPs will have access to real-time network data through the integrated platform, potentially streamlining this process.
The reforms have the potential to deliver the desired outcomes of Ofgem's Connections Action Plan, including reducing the number of speculative applications and unviable projects, removing stalled projects, and better allocating network capacity.
The latest Global Outlook from the International Energy Agency predicts nearly one in five cars sold worldwide in 2024 will be electric vehicles (EVs). As the UK continues to transition towards a greener energy future, these reforms are a significant step towards achieving the country's clean energy goals.
The reforms in the grid connection process could unlock additional grid connection capacity of more than 400 GW, thereby significantly accelerating the deployment of new renewable projects and energy-intensive sectors like data centers that depend on reliable energy access (Finance, Energy). With the new system prioritizing renewable projects and aiming to reduce connection delays, it is expected to increase investment confidence, supporting the government's Clean Power 2030 Action Plan (Industry, Finance).
The proposed reforms also focus on managing the large backlog of overly optimistic applications by introducing a "first ready, first connected" two-gates entry system into the connections queue (Industry, Energy). This new process could potentially streamline the planning permission and grid connection process for storage assets, reducing delays and costs (Finance, Energy).
