‘Blackout Britain?’ The need for grid connection reform

Later this week, National Grid will publish its annual ‘Winter Outlook’ which presents a view of whether the country will have enough energy to meet demand. This will be closely examined, following reports that the UK is preparing for potential blackouts under ‘reasonable worst-case scenarios’.

In the last two weeks, LCP modelled that the UK ‘Loss of Load Expectation’ (insimple terms number of hours of blackouts) over the winter could be up to 70 hours.

Whilst the newly formed Cabinet has acted quickly in capping energy bills, sky high costs & potential black outs paint a grim picture for UK households and businesses over the coming months.

Assuming these forecasts come to pass, it is likely BEIS, OFGEM & National Grid will use the Spring to explore how we managed to get into this mess. No doubt the macro-trends will be explored as the underlying factors:

- Putin’s invasion of Ukraine and Europe’s fundamental addiction to cheap Russian gas over the last two decades

- A perfect storm in which power from both Norway and France ceases to flow due to low water levels in Norwegian pumped hydro facilities and multiple maintenance issues with the French nuclear fleet

Wider European policy decisions will be explored such as the German decision to turn off its nuclear power plants. Michael Bloomberg called this a ‘Crime against the climate’, and it may well become a crime against the German people if these power stations, which can provide around 10% of Germany’s electricity, are not re-started before the Winter.

The ‘TEC’ conundrum

However, I want to focus on the UK’s inability to build enough power capacity and in particular the ‘TEC’ contracting regime & concept of ‘Queue management’. Although less interesting than the global energy markets, it holds huge importance and should be scrutinised by OFGEM and BEIS in the same way business models and hedging strategies (or lack thereof) of failed suppliers have been scrutinised in recent months.

The National Grid regularly publishes a Transmission Entry Capacity ‘TEC’ register, which details which assets are due to be constructed and energised in the coming years. It paints a rosy picture of 100s of GWs of assets coming online, far more than the UK’s peak demand requirement of approximately 50GW.

Looking at this register, you would not believe the UK was planning for Winter blackouts.

Therein lies the problem.

The barriers to entry to secure TEC are low. You can apply for a grid connection application at relatively low cost (when compared to building a project). You do not need proof that you have secured the land, started the planning process or even have a viable business model.

All you need is a competent connection application and the cash to pay.

This has resulted in tens, if not hundreds of projects, which have secured TEC for construction in the coming years, which have low to zero chance of being built.

A 500MW solar farm may hold TEC to connect to the network in 2024, even if it hasn’t secured the land (approx. 1000 acres required) or initiated its DCO planning process.

The result of this is that projects that are moving, that have planning and funding in place, cannot connect to network because they are behind these projects in the queue. The reason they are behind, simply because they didn’t pay the connection application as fast as the party in front.

Multiple Developers have secured multiple sites with attractive connection dates of 2022,2023 and 2024 sterilising capacity and National Grid engineering time for any projects behind them in the queue.

The Curse of the ‘MODAP’

So what happens when a project that has not progressed, reaches its connection year? It simply submits a ‘Modification Application’ (MODAP), pushing back the connection a calendar year. I will be doing a separate article on the Curse of the MODAP in the coming weeks.

Kona Energy has performed a full analysis of the TEC register and MODAPs over the last three years, looking at the main guilty parties and the fact there is seemingly no recourse against this activity.

Queue Management & The TEC Amnesty

National Grid are well aware of these issues and have recently introduced the ‘TEC amnesty’. The  amnesty allows parties to withdraw stalled projects (for example if a project planning application is rejected) at zero or reduced costs (which would otherwise incur considerable termination fees).

This is an important step to ensuring desperately needed assets which can progress are constructed as soon as possible.

Addressing the issues more systematically, National Grid ESO are planning to introduce CMP376, which looks to implement a form of ‘Queue Management’. In short, if a project does not hit certain milestones (securing land, planning, funding, hitting construction milestones etc.), National Grid can terminate its contract, allowing other projects to progress more quickly.

I will be supporting the implementation of queue management and urge National Grid to be bold in their decisions. They will not please everyone, but should make the hard but logical decisions to ensuring a more efficient connections process. I encourage other market participants to support CMP376.

Conclusion

When BEIS/OFGEM do sit down to review the Energy Markets next spring, blackouts or no blackouts, there is a clear need for URGENT change. Whilst crisis is a term thrown around almost daily in relation to blackouts, energy bills and climate change, the pace of action is dreadfully slow.

Policy makers, National Grid & industry bodies need to work together in record-speed and not be bogged down by endless consultations, to take meaningful action. We commend the ESO’s stance on queue management and hope it can be implemented in record time.

Written by Andy Willis, Founder of Kona Energy