Ofgem Approval of Grid Connection Queue Reform (TM04+)

The recent approval by Ofgem of the National Energy System Operator's (NESO) Target Model Option 4+ (TMO4+) grid connections reform package marks a significant milestone in the ongoing efforts to streamline and enhance the electricity connections process in Great Britain. This reform is pivotal in aligning the grid connection process with the strategic energy needs of the country, particularly in the context of the Government's Clean Power 2030 Action Plan (CP2030AP). This briefing note provides an overview of the TMO4+ reforms, their implications, and the expected benefits for the energy sector.

Background

The TMO4+ reform package is a comprehensive overhaul of the existing grid connections process, which has been plagued by inefficiencies and long waiting times. The current system, operating on a "first come, first served" basis, has resulted in a misalignment with the strategic energy needs outlined in the CP2030AP and Ofgem has announced that "zombie" projects---those which have secured a position in the grid connection queue but are stalled or unable to proceed swiftly due to lacking land rights or planning permissions---will no longer delay the queue for grid connection.

The reform aims to transition to a "First Ready, First Connected" model, prioritising projects that are both ready and strategically needed. The reform package will apply not only to projects seeking new grid connections but also to those with offers in place that are not yet energised, spanning across connections for demand and generation and applying to both transmission connections and regional distribution connections deemed to have an impact on the transmission system. The reforms aim to unlock £40bn in private investment annually and accelerate grid connections for fast-growing energy intensive industries such as data centres.

Key Features of TMO4+

• Readiness and Strategic Alignment Criteria: Under the TMO4+ reforms, projects must meet specific readiness criteria, such as securing land rights or obtaining planning consent, to qualify for a firm connection offer. Additionally, projects must align with the strategic capacity levels set out in the CP2030AP to be deemed "needed".

• Gate System: The reform introduces a gated process for connection offers. Projects that meet the readiness and strategic alignment criteria will receive a "Gate 2" offer, which includes a confirmed connection date and location. Projects that do not meet these criteria will be deprioritised and receive a "Gate 1" offer, which is indicative and subject to future reassessment.

• Protections for Existing Projects: The reform includes provisions to protect certain existing projects, ensuring they retain their queue position and connection dates if they meet specific progress milestones.

• Industries of the Future: Industries of the future, ranging from data centres and AI to wind and solar projects, will be pushed to the front of the queue for grid connections, but will remain subject to the GB-wide capacity range for the relevant technology set out in the Connections reform annex of the CP2030 Action Plan for each of Phase 1 (2026-2030) and Phase 2 (2031-2035).

• Licence Standstill and Queue Realignment: Ofgem's approval initiates a 56-day licence standstill period from 15 April to 10 June 2025, after which existing grid connection offers will be reassessed under new criteria, requiring most UK projects to apply for Gate 1 or Gate 2 offers. It is expected that the Gate 2 application window for distribution generation connected customers will open in May 2025 and transmission projects in July 2025.

Implications for Stakeholders

The TMO4+ reforms are expected to have wide-ranging implications for various stakeholders in the energy sector:

• Project Developers: Developers will need to ensure their projects meet the readiness and strategic alignment criteria to secure firm connection offers. This may require adjustments in project planning and development timelines due to changing connection lead times, connection points, and connection costs.
• Network Operators: The reforms will necessitate changes in how network operators manage the connections queue and issue offers. Operators will need to align their processes with the new methodologies set out by NESO.
• Investors: The reforms aim to increase investor confidence by providing clearer signals about which projects are likely to receive timely connections, thereby reducing the risk of investment in projects that may not progress.

Expected Benefits

The TMO4+ reforms are designed to deliver several key benefits:

• Efficient Network Planning: By prioritising projects that are ready and needed, the reforms are expected to lead to more efficient network planning and build-out, reducing unnecessary costs and delays.
• Accelerated Connections: The new process is anticipated to accelerate the rate of connections, supporting the timely delivery of projects needed to achieve the CP2030AP targets.
• Enhanced Investor Confidence: By providing a more predictable and transparent connections process, the reforms are expected to boost investor confidence and encourage investment in the energy sector.

Final thoughts

Ofgem's approval of the TMO4+ grid connections reform package represents a significant step forward in aligning the electricity connections process with the strategic energy needs of Great Britain. By prioritising projects that are ready and strategically needed, the reforms aim to enhance the efficiency and effectiveness of the grid connections process to support the country's transition to a cleaner and more sustainable energy system.  The reforms will undoubtedly require developers to carefully consider their existing connection offer strategies to ensure alignment with the overhauled grid connections process and will require consideration of project development plans as a whole to ensure changing lead times and costs are properly managed.