Grid congestion in UK development

On Tuesday 7th February 2023, Rishi Sunak (UK Prime Minister), confirmed a new government department for energy security and net zero. This change was implemented to ensure the right teams are in place to tackle the PM’s five key priorities, including: “to halve inflation, grow the economy, reduce debt, cut waiting lists and stop the boats”.

The BEIS (Department for Business, Energy & Industrial Strategy) has created three entirely new divisions to boost the economic growth and address the energy crisis too. One of these include a new department dedicated to energy supply and net zero under the leadership of the transport secretary, Grant Shapps.

What will the impact of this be on our grid connection? 

To power net zero, the energy sector has to make a speedy and efficient transition to more cost-effective and greener sources. This includes recommendations for both solar and onshore wind. With deployment roadmaps in place for 2023, which is vital in order for a net zero electricity grid to come into force in 2035, there needs to be critical thinking, diligent and considered actions to bring this into effect.

But firstly, let’s reflect on grid connection. Our Development Director, Mark Rowcroft shared insights surrounding the history of our grid and how it will continue to evolve, especially since these new changes have come into fruition:

Once upon a time, grid connections for renewable generation were a simple affair. A developer called the local District Network Operator (DNO) via a ‘commercial engineer’ who they, often as not knew well, told them they wanted to connect so-many-megawatts at such-and-such a place. They met up for a cup of tea and an informal chat where the network was discussed and, if all clear – a G99 ENA application followed. Onshore wind turbines were c2MWp each back then, solar was 5MW at the very most and no-one wanted the trouble of a Nationally Significant Infrastructure Project (NSIP) or it’s Scottish counterpart a Section 36 Consent – each triggered by developments greater than 50MW. National Grid didn’t want to know about generation connections at the DNO level unless they were greater than 50MW either as grid supply point transformers at 400kV and 275kV are generally rated at hundreds of MWs. Projects chased subsidy in the form of ROCs or the FiT – so all wanted to connect quickly and most projects would be energised within 24 months with payments lodged with the DNO to keep them cash positive throughout the works.

Connection applications were free then, whilst a third-party consultant report appraising points of connection were c£5k and this led to FiT chasing developers ‘shot-gunning’ applications into the DNO, at all different connection points to allow them to choose the best projects letting about 90% of them lapse. In response DNOs, drowning in work introduced application fees in order to dissuade this gaming of the system. ROCs died and the FiT ended and combined with a defacto ban on onshore wind in England, the English DNOs became quieter from 2015. 2017 saw the removal of minimum import tariffs on solar panels in the EU and marked the break-over point where merchant solar, if delivered at scale – could be viable – 49.9MW, just under NSIP would be ideal.

Fast forward six years. 81GW of collocated solar and battery development is mooted in the planning corridors, 60GW of that is trying to access the transmission network directly – looking to avoid local constraints by leaping clean over them – and 50 sites intend to be over 500MW, NSIP or not. Five sites have a planned capacity of over 1GW. Distribution connections over 1MW lead to a Project Progression and every energisation date, once National Grid have reviewed is in the 2030s.

However only 20GW of these are official planning applications.

There is huge speculation in the solar development space, and battery for now at least – compounds the issue. So many developers treat the attainment of a land exclusivity and a grid connection offer as a valuable asset even if they have no chance of planning success or often even the means to submit an application, and no route to market.

The system wasn’t built for this.

The grid supply points hosting 275kV and 400kV super-grid transformers, rated in hundreds of MW are now filled by a single application or a cohort of a handful – each at least 50MW. The DNO is duty-bound to treat each project, not on merit but by their position in the queue. The TSO, National Grid receives each of these projects from the DNO via Statement of Works and Project Progression and redesigns the network to make accommodations for all of these projects – knowing full well that only a small fraction will actually go on to connect. The system was designed to accommodate serious projects destined to connect not speculators looking to flip a field and a grid offer for the total investment of £50k.

Because of the volume of projects entering the DNO and then the TSO, massive upgrades are being designed into the transmission network. Line upgrades new substations and scores of new super-grid transformers are being designed into the future network about every three months, updated again and again as more and more projects are added to the apparent future grid populated by the peak output of projects that will never happen.

So why are the DNOs not kicking off these chancers who are sitting on capacity?

They are supposed to be hitting contractual milestones and making payments towards their connection! Most offers obligate planning to be submitted within two months of acceptance but the DNOs, in light of the uncertainty the Project Progression process presents has been allowing developers to sit on capacity compounding the problem as everyone just stays in the (unweighted, unseen, blind, dumb and deaf) queue.

The recent TEC Amnesty, an initiative by National Grid to allow developers to relinquish capacity they can’t use – without penalty is a further example of that mentality with anecdotally only 6MW given up as of January 2023. This communal resource continues to be seen as an asset, a valuable commodity that will be prised from the developers cold, dead hand. It’s hard to understate the idiocy of the current situation. The never-ending redesign of the grid, the constant flow of SGTs being added to the network and the inability for the works to even start as more and more sites are added. Even the sites with early connection dates could not run because they would theoretically see constant outages as each new site, and their associated reinforcements were added. All of this is before Ofgem finally wakes up and realises that network operators in delivering this hot, expensive mess would be in breach of their licence obligations by allowing the proliferation of this apparatus that’d further burden the UK consumers energy bill!

I could go on, but at this point everyone knows it’s a huge problem and the design works being undertaken creating an army of busy fools, but what’s the solution?

There are several, all of which will make this log-jam clear with the wave of a pen (albeit with some wailing and gnashing of teeth).

1. Not all projects are equal – open up the queue. We as developers have no sight of who’s in front of us and the DNO does no initial nor ongoing due-diligence on applicants. So a perfectly formed, optioned, consented, funded solar project by a reputable developer could be stuck behind a 100MW lapsed exclusivity backed project by Bill and Bob DevCo, who have scraped together the grid acceptance and haven’t yet discovered they’re an NSIP project because ‘that’s the buyer’s problem’ – and they are ahead simply as their email arrived first. Publishing the queue would be a start, pre-qualifying applicants would be an improvement but at least checking that the project is on secured land and is moving / is capable to move through it’s milestones is a minimum. Then when it’s obvious a land position has lapsed or a planning application has failed / not occurred – clear them out for projects that can move on.

2. Enforce the milestone – separate the wheat from the chaff. Grid acceptance is seen as a low regret decision. You lodge your payment, usually £50k but little of that is spent as it can only be used for your project and, if you withdraw – you’ll get most of that back. Even the Project Progression fee is a maximum of £18k and that’s only if you’re in a cohort of your own, more often it’s a 10th of that. Forcing the planning application within say 6 months of acceptance (to account for surveys etc) would cut many projects – those without solid prospects or foundations out of the pipeline, making room for sites that do proceed. Project churn rate would rise but a higher bar to entry is needed in the light of this much speculation.

3. Revisit contracted capacity – The grid is full but there are few warm cables. Every generator on the network looks to secure its full installed capacity, irrespective of its utilisation factor. That means in a network design sense a wind farm exports its full power at the same time as a solar farm, gas peaker and BESS site. In reality most of these sites will see a capacity factor of between 10 and 50% and never peak together. A network design that is cognisant of what’s on the network and how it’s used combined with developers accepting connections that they NEED as opposed to want will free up GWs.

4. Increase flexibility in the network – work the when not the watt. Smart metering, agile pricing coupled to energy storage means that we’d no longer be tied to higher and higher peak demands which means less infrastructure. Connected smart devices and the ‘internet of things’ make these ‘pro-sumer’ actions increasingly automated – by time shifting load we flatten the peaks. Incentivising such measures would lead to faster adoption.

None of the above are new solutions but the current log jam increases the urgency and they will be delivered because they are a lower resistance path than simply adding more and more copper to the network and loading more and more onto the cost of operating the system. The application of these changes will result in energisation dates moving forward.

Exagen in the meantime hopes for the best and plans for the worst. We’re bullish on submitting planning applications as the sites we have are good and we develop them well and that makes for high success rates. A planning consent and a land option will be a key marker of a site with a route to market and will allow us, once the queues are ratified – to jump over the speculators. We also pick sites with good local grid so that our cost of connection is more certain, albeit with silly energisation dates because of congestion on the transmission level. Our confidence in the dates coming forward doesn’t mean we don’t protect against the worst case. We ensure our consent wording is fit for purpose. We look for 5 year planning exercise conditions and design in the ability to trigger that without triggering the main lease. We ensure that our consent term, clock start for the running of our project is fixed to the energisation date and not the entry date.

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