Ofgem consults on grid connection reform package

What has been announced

On 14 February 2025 Ofgem announced a consultation on proposed changes to the regulatory framework to implement grid connections reform, specifically the National Energy System Operator’s (NESO) Target Model Option 4 (TMO4+) package of reforms to the electricity connection process. 

As part of the announcement, Ofgem published “Minded-to Decisions” (or “preliminary” decisions) on various proposed industry code modifications, and connections methodologies, and on the findings of an impact assessment it had commissioned, as well as announcing a statutory consultation on proposed related changes to the Transmission, Distribution and Electricity System Operator licences to support the connections reform process. The package of proposed changes was sent to Ofgem by NESO on 20 December 2024.

Outline of the grid reform package

The new grid connection system is designed to prioritise projects that are “ready” and “needed”, moving away from the previous “first come, first connected” basis in which projects are prioritised based on the date their connection offer is accepted.

Ofgem notes that waiting times in the current electricity connections queue are too long, the connections rate is too slow, and the mix of generation/storage projects in the queue is misaligned with system need far in excess of what is needed under future demand scenarios, risking the confidence of investors. New connection offer dates are noted as extending out into the 2040s.

The new connections package does not just focus on those projects that are “ready” to connect, but also requires that projects must be aligned with long-term strategic planning for the UK’s energy system, meaning alignment in the short term with the Government’s Clean Power 2030 Action Plan (CP2030 Action Plan), and in the longer term the Strategic Spatial Energy Plan (SSEP), which is due in 2026.

Relevant criteria

The TM04+ grid reform package introduces criteria to be satisfied for projects to be “ready” and “needed”. The criteria will apply to both new-applicant projects, as well as projects with places in the current grid queue, although with certain existing projects being protected. The new regime is primarily focused on projects connecting at the transmission level, although it also applies to generation and storage projects connecting at distribution level where they qualify for a Transmission Impact Assessment. Smaller generation and storage projects and all demand projects connecting at distribution level are out of scope. In brief:

• for a project to be “ready”, it must meet the Readiness Criteria, which will generally mean obtaining and evidencing exclusive land rights, (e.g. an option, lease or existing ownership), including minimum acreage requirements, or (for a project pursuing the Development Consent Order process) submission of (and validation of) an application for planning consent; and
• for a project to be “needed”, it must meet the Strategic Alignment Criteria, which for most projects will mean being aligned with the capacities outlined in the CP2030 Action Plan. The CP2030 Action Plan sets out the capacities for different technologies needed by the energy system up to 2035. For those technologies where regional capacities are provided, NESO is empowered to rebalance zonal capacities and adjust the capacity allocated to the same technologies in adjacent or overlaying zones, to balance any over-and under-supply of projects.

As mentioned, certain projects in the existing queue will be “protected”. These are projects due to commission in 2026, as well as other “significantly progressed” projects, being projects that have secured planning consent, been awarded a Contract for Difference, Capacity Market contract or interconnector cap and floor by the end of the first application period. These projects are deemed as “needed” and meeting the Strategic Alignment Criteria.

In addition, it is proposed that there will be a “Project Designation Methodology”, enabling NESO to prioritise projects that can deliver significant net zero, system or consumer benefits, projects that are critical to security of supply, critical to system operation, materially reduce system/network constraints, are highly innovative or have particularly long lead times. These projects will be deemed to meet the Strategic Alignment Criteria.

Certain technologies “not” in scope of the CP2030 Action Plan, such as transmission-connected demand, will also automatically meet the Gate 2 Strategic Alignment Criteria.

“Gates” and connection offers

The TM04+ proposals envisage that NESO will make connection offers through a process involving “Gates”, following periodic application windows. In summary:

• Gate 1 offers (indicative) (transmission connection only) – this applies to both new applicants and existing queue members. Gate 1 offers would be made to projects which are not “ready” or not “needed” and would offer only an indicative connection date and location. Projects can then reapply for a Gate 2 offer in a future application window when they can evidence that they are “ready” and “needed”
• Gate 2 offers (with confirmed details, i. connection date and location) (transmission and distribution) – this also applies to both new applicants and existing queue members. Projects that meet the Readiness and Strategic Alignment criteria (including “protected” projects), and all ready “demand” projects at transmission level, will be offered a Gate 2 contract or, for existing queue members, will maintain a position in the queue, (or advance to fill gaps in the queue created by the removal of non-ready projects).

Once a project has met the Gate 2 criteria and signed a Gate 2 contract there will be ongoing compliance requirements for the project in terms of land and planning. These requirements will be a variation of the existing Queue Management Milestones in the current system.

Ofgem sees the proposed TM04+ grid reform package as having the benefit of promoting:

• more efficient network planning
• investor confidence
• timely delivery of projects aligned with the CP2030 Action Plan
• acceleration of the reduction of reliance on fossil fuels
• security of supply; and
• acceleration of large demand projects in the queue.

Next steps

Ofgem’s consultation on NESO’s grid reform package will close on 14 March 2024. Final decisions are expected to be taken by Ofgem by the end of Q1 2025.

NESO has recently paused, (as of 29 January 2025), new applications received for grid connections (with certain exceptions), with the aim of allowing resources to be allocated to implementing the new grid connection reforms. NESO notes that in 2023/2024 alone it received over 1,700 applications to connect to the grid, leaving more projects already in the queue than are required for the energy system in 2030, or even 2035.

Ofgem has announced an aim to transition to the reformed connection process in Spring 2025.