The final NESO proposals for grid connection reform are planned for this week

We hear from law firm Freeths about the latest reforms to the National Energy System Operator’s (NESO) grid connection queue, which will completely rewrite the system for connecting projects to the grid.

Reforms to help address the 739GW backlog, which far exceeds all forecasts of future UK electricity demand, have been discussed for several years, but the pace of progress has accelerated since Labor won the election, Freeths said ‘ Clean energy knowledge leader Shraiya Thapa told Current.

The system has historically operated on a first-come, first-served basis, but that will now radically change.

The transition to a closed system is progressing under the new government

“It’s all happened very quickly recently. The really rapid progress in this area has been made in the last six months when the new Labor government brought forward the clean electricity target to 2030, compared to 2035 under the previous government,” she said.

“The transition to a first-ready, first-connected system was introduced about a year ago, but in the last six months a new first-needed aspect has come into play.”

Final proposals for the methods to move the entire queue into one of two “gates” are expected to be released on Friday this week. Should this be approved by Ofgem, hopefully in the first quarter of 2025, NESO can begin to identify which projects will receive Gate 1 or Gate 2 bids.

Gate 2 will be the new queue, while one developer recently described Gate 1 as containing projects that are “essentially non-existent to the system operator.”

Demonstrating that a project is “ready and needed.”

To gain access to Gate 2, project owners must demonstrate that their project is not only ready for progress, but also “strategically aligned” with the needs of the system, i.e. “necessary.”

“Being ready means that certain land rights are in place or, for projects following the DCO route, an application for planning permission has been submitted,” Thapa said.

“Then you have to show that you are needed. For most projects, this means demonstrating that you are strategically aligned with the Clean Power 2030 (CP30) plan. It is also possible to qualify as a transmission-linked demand project outside the scope of CP30 or as a “designated” project.”

As already reported by Current ±, Other ways to demonstrate strategic direction include entering into a Contract for Difference (CfD) or a Capacity Market Contract (CM) where planning has been achieved by the end of May 2025 in the current timeframe, while there are exceptions for construction work or commissioning due by the end of 2026 .

“However, NESO is yet to clarify exactly what ‘under construction’ means, as at the moment it could just mean that there is a spade in the ground,” Thapa added.

New figures from CP30 provide clarity

On Friday last week, the government released its full CP30 Action Plan, a plan and reform package to achieve clean energy by 2030. The report included numbers that will help developers see how likely NESO will deem their project “needed.” .

Thapa said: “These show by technology type what the government considers strategically necessary and where in 11 transmission and eight distribution zones.” NESO will look at these zones and numbers and, when tendering its grid connection offers, decide how much of which technology will come from the Queue where needed.”

For example, the report predicts that 27 to 30 GW of battery energy storage systems (BESS) will be needed by 2030, up from 4.5 GW currently online.

The latest aspects of the reform

There are two other aspects of grid connection reform that have recently been put forward as proposals. One of these is a new financial instrument that would involve providing some cash security to pass Gate 2, currently valued at £20,000 per MW.

“You could lose it or part of it if your project fails to meet milestones and goes unimplemented or is downsized. This would be an expanded version of the current securities regime, essentially raising the bar at an earlier stage than is currently the case,” Thapa explained.

National Grid Electricity Transmission (the transmission owner for England and Wales) has also proposed increasing the threshold for a transmission impact assessment from 1 MW to 5 MW. Projects below that size could be exempt from the new Gate 1 and 2 system and its requirements, Thapa said.

“It will be interesting to see whether it will be a clean or uniform 5MW or whether there will be exceptions due to regional restrictions as, for example, 4.9MW could be significant in some places. Project sizes also often follow “clean” thresholds, as demonstrated by the number of BESS projects expanded to 49.9 MW based on planning thresholds,” she added.

The impact of the reforms is difficult to estimate; some will be more affected than others

Thapa declined to give figures on how much this will reduce the backlog in the queue. “It is difficult to estimate exactly how many projects will reach Gate 2, as we are still waiting for the final form of the changes and the outcome of the process itself.”

She said developers generally agreed with the goal the reforms were intended to achieve, but there were concerns about some of the finer points and that “some developers will be impacted much more than others”.

Freeths published a technical summary of the key aspects of the grid connectivity reform proposals on November 11, available here.