Kona Energy’s seven-point plan for Connection Reform - “Clean Power 2035”
Kona Energy has outlined seven proposals in its Connection Reform consultation response.
While the Clean Power 2030 ambition is commendable, Kona Energy believes that achieving this goal within the current framework is unrealistic and risks undermining investor confidence and the UK’s broader energy security.
“The Clean Power 2030 ambition is laudable, but it is clear we will not meet it. My final message to Government, NESO & OFGEM would be to focus on 2035 and provide much needed certainty for projects connecting before 2030.” - Andy Willis, CEO of Kona Energy.
Kona Energy’s Seven-Point Plan:
1 - The task is ‘herculean’, so take the low hanging fruit. Transmission projects which secure Capacity Market agreements or CFDs should be exempt. Investor confidence is crucial and clashing policies will damage this (see Kona’s previous letter).
2 - Prioritise advanced projects. A land option does not constitute ‘Readiness’ and is a low barrier to entry. Projects which have achieved planning and can reach FID in the next 6-months should be prioritised.
3 - Queue management needs enforcement. There are projects that have been sitting idle for years in the current connections queue. Queue Management has not removed these projects and Connection Reform provides them with yet another lifeline. Furthermore, their early queue positions mean they will benefit most under Connection Reform.
4 - Consider the reality. Transmission Owners are not building new connections for ‘ready’ and live projects before 2028 due to significant design resource limitations. Further uncertainty in the coming 12-months means fewer projects will be operational before 2029.
5 - Procurement and Financial Investment Decisions take time. It can be 24 months+ for Extra-High Voltage transformers and switchgear to be procured. Repeating point 4, additional investor uncertainty in near term projects will delay investment decisions and projects being built on time.
6 - Tackle constraint costs. If transmission constraints reach £10bn a year, as forecast, due to slow or delayed transmission works then public confidence in renewables will evaporate. History is not favourable when considering projects such as the Western Link or Hinkley Point C.
7 - Value Storage. Glossing over 90% plus skip-rates in the Balancing Mechanism, NG-ESO and now NESO has not understood the potential role of storage in the electricity system. NESO modelling is based on 2018 CAPEX costs and assumes one cycle a day of operation. If NESO used present-day pricing and 2+ cycles a day they would see both the need for storage and net-welfare benefit would be significantly higher.
Andy Willis added:
“We cannot afford to set unachievable goals that only create uncertainty and delay critical projects. Focusing on 2035 as a realistic target while providing certainty for projects connecting before 2030 is essential for investor confidence and energy security.”
“Kona Energy urges the Government, NESO, and OFGEM to adopt these proposals to ensure a sustainable, efficient, and reliable transition to clean power.”
Open letter:
Focus on the achievable - Clean Power by 2035
NESO’s advice to Government recommends that achieving Clean Power by 2030 is possible[1], but requires a ‘herculean’ effort. My personal view is that it is not realistic and the reform proposed makes it impossible. 2035, however, is possible.
The Clean Power 2030 plan and associated Connection Reform[2] works well in theory and is a remarkable piece of work from NESO. The fact that there hasn’t been a greater call for future judicial review highlights the industry acknowledges the issue at hand and is receptive to change.
However, we must consider reality and what is achievable. We’ve incorporated the following requests into Kona’s Connection Reform consultation response, but are sharing this letter publicly to illustrate these points. We hope NESO and Government will consider these points carefully.
1 - The task is ‘herculean’, so take the low hanging fruit. Transmission projects which secure Capacity Market agreements or CFDs should be exempt. Investor confidence is crucial and clashing policies will damage this (Please see Kona’s previous letter[3]).
2 - Prioritise advanced projects. A land option does not constitute ‘Readiness’ and is a low barrier to entry. Projects which have achieved planning and can reach FID in the next 6-months should be prioritised.
3 - Queue management needs enforcement. There are projects which have been sitting idle for years in the current connections queue. Queue Management has not removed these projects and Connection Reform provides them with yet another lifeline. Furthermore, their early queue positions mean they will benefit most under Connection Reform.
4 - Consider the reality. Transmission Owners are not building new connections for ‘ready’ and live projects before 2028 due to significant design resource limitations. Further uncertainty in the coming 12-months means fewer projects will be operational before 2029.
5 - Procurement and Financial Investment Decisions take time. It can be 24 months+ for Extra-High Voltage transformers and switchgear to be procured. Repeating point 4, additional investor uncertainty in near term projects will delay investment decisions and projects being built on time.
6 - Constraint costs are critical to support in Net Zero. If transmission constraints reach £10bn a year, as forecast, due to slow or delayed transmission works then public confidence in renewables will evaporate. History is not favourable when considering projects such as the Western Link[4] or Hinkley Point C[5].
7 - Storage has been perennially undervalued. Glossing over 90% plus skip-rates in the Balancing Mechanism[6], NG-ESO and now NESO has not understood the potential role of storage in the electricity system. NESO modelling is based on 2018 CAPEX costs and assumes one cycle a day of operation. If NESO used present-day pricing and 2+ cycles a day they would see both the need for storage and net-welfare benefit would be significantly higher.
The Nick Winser report was written in August 2023, it highlighted we could cut transmission build times for major transmission projects to 7 years[7]. It is almost 2025, Connection Reform has taken over 2 years. NGET connected 3GW of generation to its network in 2023[8].
The Clean Power 2030 ambition is laudable but it is clear we will not meet it. My final message to Government, NESO & OFGEM would be to focus on 2035 and provide much needed certainty for projects connecting before 2030.
[1] https://www.neso.energy/news/our-clean-power-2030-advice-government
[2] https://www.neso.energy/industry-information/connections/connections-reform
[3] https://www.konaenergy.co.uk/news-1/kona-energy-calls-for-capacity-market-2025-grid-connection-certaintynbsp)
[4] https://www.ofgem.gov.uk/press-release/ps158-million-redress-two-year-delay-major-western-link-subsea-cable
[5] https://www.reuters.com/business/energy/edfs-nuclear-project-britain-pushed-back-2029-may-cost-up-34-bln-2024-01-23/
[6] https://www.ft.com/content/13e8fd48-7320-4c60-9703-51d12268e868
[7] https://www.gov.uk/government/publications/accelerating-electricity-transmission-network-deployment-electricity-network-commissioners-recommendations
[8] https://www.nationalgrid.com/electricity-transmission/what-we-plugged-during-2023-year-clean-energy-connections
