Long lead times for new electricity grid connections are a major impediment to the UK's ability to deliver its commitment to decarbonise the power system by 2035. As noted in our previous article on accelerating grid connections, a number of changes are being introduced to speed up the electricity connections process in Great Britain. Longer-term, more fundamental reforms to the connections process are also being consulted upon.
One of the immediate changes is the introduction of a new queue management process for connections to the transmission system, approved by Ofgem last month. This change has been introduced through Connection and Use of System Code (CUSC) modification proposal CMP376 and sees a new Section 16 (Queue Management Process) added to the CUSC.
In this update we briefly summarise: (i) how the new queue management process will work; (ii) which connections the changes apply to; (iii) the milestones; (iv) implementation; and (v) the consequences of failing to meet the milestones.
How will the new queue management process work?
The queue management process will add project progression milestones, termed 'User Progression Milestones' to certain connecting parties' CUSC construction agreements, requiring progress against the milestones to be evidenced to the electricity system operator, National Grid Electricity System Operator (NGESO). Where a connecting party fails to progress their project in line with the milestones, NGESO will be able to (and in some cases required to) terminate the party's construction agreement, freeing up connection capacity for other projects to utilise. This change largely mirrors the existing application of milestones to distribution system connection offers.
Which connections will the changes apply to?
The queue management process will apply to:
- new connecting parties entering into a construction agreement from 27 November 2023;
- connecting parties with an existing construction agreement where the completion date is after 27 November 2025; and
- connecting parties with an existing construction agreement where the completion date is 27 November 2025 or earlier and NGESO has reason to believe that the project is not progressing in accordance with the construction programme.
The milestones
The milestones and evidence requirements below will be set out in a new Appendix Q (User Progression Milestones) to each applicable construction agreement.
User Progression Milestones and required evidence
Conditional Progression Milestones
1. Initiated Statutory Consents and Planning Permission
Evidence: submission of planning application to the relevant statutory authority or, if the project does not require a statutory consent, a declaration from the connecting party to that effect.
2. Secured Statutory Consents and Planning Permission
Evidence: the planning decision notice confirms planning permission has been granted and that this permission allows the connecting party to meet the terms included in its construction agreement.
Compliance with this milestone is an ongoing requirement.
3. Secure Land Rights
Evidence: the connecting party shall provide documentation to demonstrate that:
- it is an owner or tenant of the land on which the project is or will be situated;
- it has entered into an agreement to lease the land from the owner of the land on which the project is or will be situated;
- it has an option to purchase or to lease the land from the owner of the land on which the project is or will be situated;
- it has entered into an exclusivity agreement in relation to the land with the owner of the land on which the project is or will be situated; or
- for an offshore site, it has entered into an agreement for occupation or use of the seabed upon which the project (excluding any Offshore Transmission System Development User Works (OTSDUW)) is or will be located.
Compliance with this milestone is an ongoing requirement.
Construction Progression Milestones
5. Contestable Design Works Submission
Evidence: where applicable, written confirmation from the Relevant Transmission Licensee that design obligations (as bilaterally agreed in a User-Self Build agreement) have been received.
6. Agree Construction Plan
Evidence: the construction plan shall demonstrate how the connecting party will be ready for the Commissioning Programme Commencement Date and Completion Date. This must include a detailed programme for the User's Works with a fixed start and end date as agreed with the Relevant Transmission Licensee, and be a programme aligned with the Commissioning Programme Commencement Date and Completion Date.
7. Project commitment
Evidence: one of the following:
- a binding contract issued by the connecting party for main plant equipment;
- capital contribution payments made to NGESO in advance of connection;
- a decision paper from a formal, minuted meeting of the connecting party's board of directors evidencing the final investment decision; or
- an award of a governmental or regulatory subsidy which provides financial support or incentive to the connecting party's project.
8. Project construction
Evidence: a letter from the connecting party's board of directors or equivalent stating construction has commenced in accordance with the construction programme.
Note: milestone 4 is intentionally omitted as it does not apply to transmission connections.
The date by which each milestone has to be achieved will be calculated based on the tables set out in Section 16 of the CUSC, by working backwards from the completion date. Therefore, it is important that connecting parties are comfortable that the completion date is realistic from their perspective.
Each construction agreement will retain a separate Appendix J (Construction Programme).
Implementation
For new construction agreements from 27 November 2023, the queue management clauses and milestones will be automatically included in the construction agreement.
Connecting parties with an existing construction agreement with a completion date post-27 November 2025 will have the option to make a modification application to have milestones applied to their existing completion date, or a new completion date. If a modification application is not submitted by 27 May 2024, or has not been accepted by such date, NGESO will issue an agreement to vary the connecting party's construction agreement, which will introduce milestones based on the existing construction programme. If the agreement to vary is not accepted, NGESO will rely on its variation rights under the construction agreement to unilaterally impose the milestones and related provisions.
Where NGESO determines that a project with an existing completion date of 27 November 2025 or earlier is not progressing in line with the construction programme, the connecting party will have two months to make a modification application to have milestones applied to their existing completion date, or a new completion date. If a modification application is not submitted, or has not been accepted within two months, NGESO will issue an agreement to vary the construction agreement to introduce milestones based on the existing construction programme. If the agreement to vary is not accepted, NGESO will unilaterally impose the milestones and related provisions.
Existing connecting parties that are concerned that their completion date may not be achievable should consider making a modification application to have their milestones set using a new completion date.
Consequences of failing to meet the milestones
NGESO has sole discretion to determine whether a milestone has been met. If a connecting party fails to satisfy NGESO that a milestone has been met by the required date, NGESO will notify the connecting party that the project is categorised as 'Termination'. The connecting party will then have a further 60 days to meet the missed milestone.
If the milestone is met within this remedy period, the project categorisation will return to 'On Track'.
If the milestone is not met within this remedy period:
- where the milestone is a Conditional Progression Milestone (see above), the construction agreement will be terminated; and
- where the milestone is a Construction Progression Milestone (see above), the construction agreement may be terminated at NGESO's discretion.
NGESO's published guidance states that there will be an internal NGESO escalation process before a construction agreement is terminated for failure to achieve a Construction Progression Milestone.
Importantly, where a connecting party is able to satisfy NGESO that failure to meet a milestone is due to certain exceptional issues below, the project status will not be categorised as 'Termination', and a new milestone date will be issued by NGESO. These exceptional issues are delays caused by:
- force majeure;
- NGESO or a Relevant Transmission Licensee;
- a third party other than the Relevant Transmission Licensee, where the connecting party could not have avoided the delay by the exercise of good industry practice; and
- planning appeals and third-party challenges in relation to the connecting party's consents.
To qualify for this relief, the delay must be notified to NGESO at the earliest possible opportunity.
Final thoughts
The queue management process will provide NGESO with robust new rights to terminate construction agreements where projects are not being progressed. Up until now, NGESO has had to wait until the backstop date before it could terminate a connection agreement for failure to progress. NGESO's new rights should help to reduce the transmission connections queue by removing projects that are not progressing at sufficient pace.
To what extent this will reduce connection times is unclear at this stage, but the effect is likely to be positive. However, there will be project developers that have legitimate concerns about losing their place in the queue due to unexpected or relatively minor delays. These developers will need to rely on NGESO exercising its discretion reasonably and the 60-day remedy period. It should, however, be noted that NGESO will not have discretion in relation to failures to meet Conditional Progression Milestones.
All connecting parties affected by these changes should carefully consider their options, particularly in relation to any modification application. Having a realistic completion date will be key to reducing the risk of not meeting milestones.
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