Developers: Will you be “First Ready, First Connected”?

The Connections Queue

The Electricity Systems Operator (“ESO”) predicts that electricity demand in Great Britain will grow by 64% by 2035 as more sectors switch to electricity. Project developers seeking to connect to the electricity grid face significant delays and backlogs to achieving grid connection, with some projects being offered connection dates in the late 2030s proving costly in both time and project funding.

Part of the issue is attributed to “zombie projects”. Under the current ‘first-come, first-served’ system, projects that have stopped development still maintain their place in the grid connections queue, meaning that many projects which are further along their development timeline, but entered the queue at a later date, are held up. It is estimated that the long queue currently under the “First-Come, First-Served” system could, if cleared, generate circa 400GW of electricity, which is more than what is needed to power the entire British energy system.

It has been acknowledged that grid connection delays are now the greatest barrier to Britain achieving net-zero by 2050.

TMO4+

Annual Application Window

• Applications for new connection offers are checked in respect of validity.
• A letter of authority confirming that either:
  • i. the relevant project manager has formally engaged in discussions with the landowner; or
  • ii. the project developer is the landowner.

• Financial instruments
  • i. Whether the barrier to entry should be raised by way of having a ‘financial instrument’ (such as a charge) for connection offer applications.

Gate 1

At this stage, a connection offer is issued:

• the offer will only be an indicative connection date;
• the offer will not require credit support from the customer in respect of early termination liabilities; and
• “queue management” termination rights in favour of ESO will not apply to these offers.

Each of the above elements will form a part of the connection offers if a project reaches the Gate 2 criteria. Gate 1 connection offers are not “full form”.

Timings up to reaching Gate 1 will not dictate a project position in the connections queue.

Timescales for customers to accept issued connection offers are not yet confirmed.

Gate 2

The connection date decided at Gate 2 may be earlier or later than the indicative date given at Gate 1, however, connection offers made at Gate 1 will only become “full form” upon the following criteria being satisfied:

• Land rights
  • the customer must show it either has an option to purchase or lease the land from the owner; or
  • an agreement to lease the land from the owner (NB: an exclusivity agreement will not be sufficient)
• Planning
  • submission of a planning application to the relevant authority, or
  • a statement that statutory consent is not required
• Alternative EGO designation
  • Where the above criteria are not met, the EGO can use their discretion to designate projects as having met Gate 2 (i.e. for projects identified as critical for security of supply)
• Potential for further financial instruments
  • Continuing review of whether to raise barriers to entry through having a financial instrument.

For projects that have successfully passed Gate 1 and are undergoing works to meet Gate 2, assessments will take place at regular intervals throughout the year.

Once the Gate 2 criteria are met, a full connection offer will be issued, this will include security for termination liabilities; a secured place in the queue and relevant queue management milestone termination rights.

As the 1 January 2025 deadline is fast approaching, project developers will need to factor the new protocol into their project timelines to avoid costly delays to their developments to streamline their grid connections and finalise their projects.

If you need legal advice on projects within the energy sector, contact Blake Morgan’s Property and Real Estate team.