Podcast: Grid News and Views #12

00:00:05 – Pete Aston

Hello and welcome to another episode of Roadnight Taylor’s the Connectology® Podcast. I’m Pete Aston and I’m joined by Catherine Cleary and Nikki Pillinger.

00:00:13 – Catherine Cleary

Hi Pete.

00:00:15 – Pete Aston

And we are here to do another sort of grid news and views update. So, let’s get stuck in, because there’s always lots going on. First one that we’ve got on the list is an identification that some DNOs are issuing grid variations with really short acceptance dates – I don’t know that either of you two have actually seen this yourselves?

00:00:38 – Nikki Pillinger

Yeah, I have.

00:00:39 – Pete Aston

You have?

00:00:39 – Nikki Pillinger

Yeah.

00:00:40 – Pete Aston

Okay.

00:00:41 – Nikki Pillinger

More like sort of 10- or 14-day acceptance periods.

00:00:44 – Pete Aston

Yeah, and are these just variations; anything to do with Connections Reform, or just variations?

00:00:50 – Nikki Pillinger

No, they’re just variations which frustratingly take quite a long time to get at the moment. Even if it’s just variations to cost or if something was wrong in a previous variation that we’ve had, they are taking quite a long time to come out, and even if they’re, and you know, even if we get them and then there’s errors, then there is then quite a long time to get any answers on them, say longer response periods required.

00:01:17 – Pete Aston

Yeah, seven, ten, fourteen days is quite short period to actually review a variation, especially if terms and conditions are changing and, you know, fundamentally changing the basis on which the offer was issued in the first place, so I guess that’s something just to keep note of that’s happening. Maybe push back against the DNO, but yeah, have you had any success with getting a longer acceptance period?

00:01:39 – Nikki Pillinger

Yes, especially if there’s clearly something that needs, that needs editing.

00:01:42 – Pete Aston

Yeah.

00:01:43 – Catherine Cleary

I suppose it can be challenging when that variation is issued in response to the outcome of a modification application or something, or a transmission works, because then sometimes the DNO has spent quite a lot of their acceptance period kind of potentially negotiating and then the five working days or seven days is coming because that’s the deadline they’ve got to accept their agreement with NESO, and then it’s presumably a to bit harder to push back.

00:02:07 – Pete Aston

Yeah, yeah, absolutely. So yeah, that’s just something to be aware of what’s going on. Moving now onto Connections Reform. Gate 2 I think NESO, a few weeks back from the date we’re recording anyway, published their timescales, so there’s an interactive timeline of everything for Gate 2 and Connections Reform. Is there anything that’s worth picking up on that in terms of key dates?

00:02:34 – Catherine Cleary

Well, I think probably the most important dates which I think have been quite clearly communicated now, is the Gate 2 window for all transmission connected customers and anyone who’s making their Gate 2 declaration to NESO, so that’s like large generators as well, and that opens on the 8th of July and closes on the 29th of July – so I think those are really key dates.

They have come out and confirmed, so on that timeline, I think it’s quite good they’ve confirmed that they’re intending to come back to everyone and notify them whether or not they’re going to get a Gate 2 offer in September. So that will be quite useful, I think, because people will have a sort of heads up with a bit of reassurance to say you know, yes, you are still in the queue or, sorry, no, you’re going to get a Gate 1. And then it’s quite ambitious, the timeline at the moment says that first Gate 2 offers for transmission customers could come out in October and with D customers to follow shortly after. I mean, I think we probably think that’s quite …

00:03:30 – Pete Aston

That’s pretty optimistic.

00:03:31 – Catherine Cleary

I think it is quite optimistic. You know, I think what’s probably more likely is, I imagine there are probably a very small number of projects which are expecting to connect next year where we’re not really expecting Gate 2 to change anything for those projects and those offers should come out first. But at the moment the timeline shows everyone in phase one, so up to the end of 2030, getting their Gate 2 offers by the end of December if you’re a transmission customer and by the end of sort of January or so if you’re a distribution customer. And again, I think that’s probably the date which is really, really ambitious because there’s quite a lot of customers affected by that.

00:04:06 – Pete Aston

So, what are the timelines for phase two?

00:04:09 – Catherine Cleary

So, phase two for transmission customers, NESO have said they’re going to try and get offers out by the end of March 2026. And then for distribution customers, Nikki?

00:04:19 – Nikki Pillinger

They should all get their offers by the end of May.

00:04:23 – Pete Aston

Still quite a long time period, I think, and these are not legally binding timelines, I guess, so they could potentially extend, even if they’re trying to get them out.

Okay, so that’s the timescale, and just so I’m clear, DNO Gate 2 applications are also up to the 29th of July, aren’t they?

00:04:46 – Catherine Cleary

Yes.

00:04:48 – Nikki Pillinger

Although we wouldn’t advise that.

00:04:49 – Catherine Cleary

Yeah, I think in general everyone getting in as early as possible, and there is a point you know, around the clarifications. So, there are sort of two sets of checks, aren’t there. There’s these basic checks that NESO, well, the DNO is going to do to make sure your application is competent, that you’ve submitted it in the right name and so on you haven’t put the wrong answer in the wrong box or anything like that and they’ll come back to people within you know, hopefully a couple of days of submission if they failed a kind of basic check. But obviously if you leave it right up until the 29th of July, then there is a bit more risk associated with that, you know they won’t have very long to check.

00:05:21 – Nikki Pillinger

And then there might be this kind of, you know, the DNOs are already quite worried because they haven’t had very many applications in yet. And they are worried about this like tidal wave of applications in the last couple of weeks where they are going to have very, very limited resource to check all of those applications and make sure that they are competent.

00:05:44 – Pete Aston

There is an interesting issue for applications if you are a transmission connection, but you are an organisation that is not a company, does not have a company in them, but, like a local authority or government or something, you can’t get access to NESO’s portal.

00:05:59 – Catherine Cleary

Yes.

00:06:01 – Pete Aston

So, they have then said that the only way that you can do a Gate 2 application is via email.

00:06:08 – Catherine Cleary

I think, though, this is still something that individual customers who are in that position and have been told they can’t register for the portal probably still need to confirm with the Connections Reform team via the dot box, because I think otherwise the Connections Reform team have been really clear. You know everyone should be submitting on the portal, so it’s only if you’ve you know, you’ve tried and you’ve been told you know, sorry, you cannot register for the portal.

00:06:31 – Pete Aston

It’s likely to be a fairly small number of customers.

00:06:34 – Catherine Cleary

Hopefully it’ll be a fairly small number of customers. I mean, I think it does identify there still are quite significant limitations and issues associated with trying to move everything onto the portal and trying to say to customers you can only talk to us via the following kind of mechanisms, you know, that it’s not a one size fits all and there are different types of organisations, different types of projects, consultants involved as well.

00:07:00 – Pete Aston

Keeping on the subject of Gate 2 and offers that are going to be coming out from sort of October onwards – offer acceptance periods. So, I guess we’ve been slightly concerned, like we were talking about for the variations on some DNO schemes just now. Are the acceptance period for these Gate 2 offers going to be shortened? I don’t know that we’ve had any formal NESO communication on this yet.

00:07:23 – Catherine Cleary

No, we have raised a question, so it should at some point hopefully trickle into the FAQs from NESO to confirm whether the validity period will still be 90 days. So far, we haven’t had anything to confirm the opposite, if that makes sense, so NESO would need to make a formal request to allow them to vary their kind of standard terms, which date has to be 90 days. So, we haven’t seen anything as yet. So, I think, yeah, watch this space. I suppose that the ask would be really to kind of, there needs to be some pragmatism about whilst we want to get Connections Reform done quickly, some of these offers are going to change significantly. Sometimes it’s going to really be people getting their first offer because people who’ve had things like transitional agreements have not really seen sight of any of their costs or engineering details. So, giving people a significantly shortened window to review all of that new information I think would be wrong and might pose more problems, to be honest, in the long run. And I guess for distribution customers, you know for DNOs, shortening that 90 days is already tight. We see end customers…

00:08:31 – Pete Aston

So, just to be clear with the DNOs, the DNO gets the Gate 2 offer from NESO, the DNO then has to review that and then the DNO has to issue variations out to their customers and those variations could then have really quite short timescales.

00:08:47 – Catherine Cleary

Yes.

Because those variations need to be accepted. Yeah, so I guess that if we, if we sort of infer a little bit, NESO timeline shows, you know effectively them saying they’re going to issue out T offers and then the equivalent date when they expect distribution customers to get their Gate 2 offers is a month later. So, imagine that’s kind of eaten a month into your 90-day period.  You know, you could imagine it might well be that distribution customers then get given a month and then the final month is the time for the DNO to actually accept that variation offer and go into contract with NESO.

00:09:24 – Pete Aston

And I guess that’s assuming that there’s no communication issues between the DNO and NESO, and then yeah, the TO’s.

00:09:33 – Catherine Cleary

So, I think it’s probably an area where, like we think that there’s quite a lot of you know, there’s been quite a lot of historic challenge in this area. We’re probably all quite aware of what can go wrong. So maybe it’s a kind of an ask to see how, you know, is there a bit of an action plan that DNOs can put together to try and prevent any of those issues occurring again? And maybe you know, because in some ways customers really like that advanced notification, don’t they? If someone says, right, well, this is the plan and you’re going to have 30 days and, by the way, you’re expecting to get your offer in a month, you know you can begin to line up your you know, your lawyers or your technical consultants or you know whoever. So, I guess that kind of like trying to come out with a bit of a plan and forewarn customers when they’re expecting to get their Gate 2 offer would be a major, a major help.

00:10:13 – Nikki Pillinger

Yeah, definitely I was speaking to UKPN the other day, and one of the quite heartening things was that they are already having conversations with NESO regarding what the situation at a certain GSP will be. So there hopefully won’t be the situation that we had with the step two offers, where a DNO gets a step two offer and it’s a complete surprise. They do appear to actually be working together throughout this whole process. One thing that I also asked for was early visibility of securities statements, if that’s available, because there’s going to be a lot of securities being needed to be placed, in whatever way that the DNO requires, around next sort of March, April – so people having early visibility is going to be really useful.

00:11:03 – Pete Aston

I assume, that there’ll be a securities update with the DNO variation.

00:11:05 – Nikki Pillinger

There should be, yes, and there should be an S-curve as well, but if there’s any early visibility of what that securities statement is going to be, then I think customers should get that so they’re prepared for what that might look like and what they might have to put down.

00:11:18 – Pete Aston

Okay thanks, Nikki, we’re going to move on now.

Nikki, you wanted to raise a point around the viability of schemes that end up with a Gate 2 offer. So, a whole bunch of customers but less than there are at the moment in the queue are going to end up with a Gate 2 offer, but quite a few of those schemes are still going to be questionable in terms of whether they can actually be delivered.

00:11:41 – Nikki Pillinger

Yes. So, one of the things that concerns me is that we’ve got a lot of offers that are hanging around at the moment that have quite unviable costs and works associated with them. The reason they’re still hanging around is because we’ve had things like the five-point plan and the three-point plan, Technical Limits, and now we have Connections Reform that are meant to kind of reduce the queue and potentially solve these issues. However, what we’re likely to end up with is still quite a lot of these offers that have Super Grid Transformer reinforcement costs, that have really high securities and liabilities, that might have completely unviable curtailment and that might have, you know, might still have a new grid supply point. You know they’re still going to be needed in some areas and that is going to make the costs of a lot of Gate 2 schemes completely unviable anyway, just because you’ve got a Gate 2 offer, it doesn’t mean that it’s going to be something that can actually be built or deliverable. You know it’s a challenging industry at the moment, costs for equipment have gone up, resource is very scarce, and it really does need to be a thing. I think that is taken into account a little bit more by potentially by Ofgem, by government, by NESO. There’s been, you know, I know we’ve spoken about this a little bit before, but there’s been a lot of things that have happened at once – you know, we haven’t just got Connections Reform, we’ve also got the Project Commitment Fee coming in, we’ve also got much more onerous application requirements. DNOs are asking for ever higher deposit payments as well. There’s a lot that’s happening that is making development maybe less hospitable and environment and, you know, making this process a lot more challenging, as well as the sort of Connections Reform lens that we’re seeing it through at the moment.

00:13:29 – Pete Aston

And I guess with attrition, Catherine, was there any mechanism within Connections Reform to sort of take up the slack of schemes that get, Gate 2 offers but don’t actually build out?

00:13:41 – Catherine Cleary

Don’t accept, yeah. So I suppose there was lots of debate wasn’t there about whether or not we should consider attrition within things like the, the kind of, the CP30 technology pots and stuff, and NESO said no, and their view, I think, is that if there is attrition where effectively Gate 2 capacity was offered out and not accepted, it kind of goes back in for the next round. So, it is possible that we end up with some kind of capacity being effectively released for the future Gate 2 windows. But I suppose, just as a reality check, there are some technology types, like battery storage for example, where we expect the total volume of Gate 2 offers to go out to be far in excess of the CP30 targets, because of the protections, and so a lot of batteries would have to not accept for there to be a kind of shortfall compared to the CP30 targets, as an example. So, I think kind of interesting to see how that runs out in the wash, and yeah, it is a case that if there are significant volumes of projects that can’t accept, then there will potentially be more opportunity for new projects to go through Gate 2 in the next Gate 2 window.

I suppose, Nikki, some of those issues, I think that you’re quite right, aren’t you, to just pull out those kind of things which have got progressively harder for developers. Some of them there are potential solutions for. So, we have got a few Code Modifications, CUSC Mods, which are aimed at targeting things like very high liabilities. So, there are a couple of those that we can pull out, things like SGT charging, Roadnight Taylor obviously being quite involved with and actually as a bit of an update, last week we took that and presented at the Charging Futures workshop. So, if anyone’s interested in kind of Charging Futures as a forum where kind of future changes to the kind of charging regime, especially sort of strategic charging reviews are considered – so that’s had quite a lot of kind of public airtime now and quite a lot of engagement from Ofgem and is looking like you know that there is potentially sort of a route forward there.

00:15:44 – Pete Aston

And the likely route forward is going to be a modification, do we think?

00:15:50 – Catherine Cleary

Yeah, I think…

00:15:53 – Pete Aston

Is that DCUSA, is that CUSC?

00:15:53 – Catherine Cleary

So that was the ask really at the Charging Futures workshop, you know it should which is the right direction for this? A CUSC modification or a DCUSA modification or both? There wasn’t an explicit, you know, I don’t even got kind of enough feedback in that session to kind of make an explicit view, and I think the debate really is do we want to spend time and effort you know, given there is quite a lot of fatigue within the industry, I think and in regards to Reform, do you want to spend a lot of time and effort coming up with the perfect solution, which might require a kind of a bit more of a task force approach and an Ofgem to coordinate that? Or actually, do we just need to go for a good enough solution, which is probably, you know, one of the code modifications, and someone just raise it. So, I think we’ll see what the appetite is this summer.

00:16:36 – Pete Aston

But it seems like the reality is, on SGT Charging, that there won’t be an SGT Charging solution before Gate 2 offers come out.

00:16:42 – Nikki Pillinger and Catherine Cleary

No.

00:16:43 – Catherine Cleary

Given the timeframes, that, yeah, even an urgent Code Mod wouldn’t go through now in time. The other two issues, though, regarding securities and liabilities, yeah, we can move on to those Pete. So, there was CMP 417, which is the proposal for demand users; so demand users are probably some of the people who we think will see, so data centres, for example, might see particularly expensive Gate 2 offers because they’re currently under the kind of final sums regime. A lot of them, those data centre applicants, have been newer applicants, so they applied during the securities freeze or you know. So, they’ve had very limited exposure to that kind of liability.

00:17:25 – Pete Aston

And final sums is basically, you’re securing the full cost of everything you trigger.

00:17:30 – Catherine Cleary

Yeah, there is no concept of kind of attributable.

00:17:33 – Pete Aston

So, it’s into hundreds of millions.

00:17:34 – Catherine Cleary

Yeah, and it could be, you know, and it could be, there’s nothing to stop you having to secure, you know, an HVDC link, that’s, you know, 200 kilometres away from your project, you know. So, whereas with generators who sit under CUSC section 15, there’s this concept of like attributable works, you know which sort of limits, electrically speaking, how far into the network you’re liable. There’s none of that for demand customers. So, yeah, demand customers get often hundreds of millions of pounds worth of liabilities.

00:17:57 – Pete Aston

And then you get the slightly galling thing that if two demand customers end up triggering the same works, they both fully secure all the works as well.

00:18:07 – Catherine Cleary

Yeah, they can end up in fact, and there’s been a lot of debate by the industry about how to kind of prevent that double counting. But the main solution which has been proposed is actually just to get rid of final sums and move everyone on to CUSC Section 15. So, move demand users on to CUSC section 15. That Code Mod is an urgent Code Mod and it’s tricky because at the moment the timings look like actually it might not quite bite for Gate 2 offers. So we might still have this issue where a customer gets issued a Gate 2 offer with hundreds of millions of pounds worth of liability, knowing that hopefully in the future, you know, maybe only a few months afterwards, there might be this Code Modification that changes that liability profile significantly, you know, and drops them down by a factor of ten or something. But that’ll be a, you know that’s quite a kind of key, one to watch, I think, for any demand customers.

00:18:58 – Pete Aston

So yeah, it’s looking like the timeline is the final report for that modification group is going to come out in February next year, which is clearly too late for Connections Reform.

00:19:07 – Nikki Pillinger

Yeah, which is unfortunate really, it does seem like a bit of a missed opportunity.

00:19:10 – Pete Aston

Just quickly picking up on securities in general with Gate 2, so the securities pause that’s happened at the moment is going to be unpaused as soon as customers get their Gate 2 offers, or is that going to be so, i.e. securities will need to be placed as soon as a Gate 2 offer is accepted, or is that unpause happening later, into 2026?

00:19:37 – Catherine Cleary

No, it’s when we are expecting your Gate 2 offer to include liability, and you’ll have to secure that liability when you accept.

00:19:43 – Pete Aston

Okay, that makes sense. Sorry, carry on.

00:19:48 – Catherine Cleary

Maybe we’re going to bring it up at the same time, so that liability might be high initially if you’re a demand user, depending on that kind of modification. But for generation users then that liability might get lower for another reason. So, there’s a second Code Modification, which is 447, which is looking at trying to remove strategic works from securities, which makes a lot of sense. I think the industry is quite aligned behind this. You know, if someone is building you is building an HVDC link, for example, or a major 400kV transmission works, that’s clearly required, you know, there are potentially hundreds of customers who are triggering that work and actually it’s not going to be untriggered if a couple of them cancel, and so the idea that everyone is securing that is sort of a bit bonkers. So that’s looking at trying to remove anything which is deemed to be that kind of strategic works level which has been approved by Ofgem and the work group for that has been reconvened and again that is another urgent Code Mod. So, kind of yeah, watch this space for timings on that one.

00:20:50 – Pete Aston

Yeah, good, I think that is the end of our list, unless there’s anything else that I’ve forgotten that you both wanted to pick up?

00:20:55 – Nikki Pillinger

No, I don’t think so.

00:20:58 – Catherine Cleary

Nikki, you mentioned the PCF, so we are…

00:21:03 – Pete Aston

What is the PCF?

0021:04 – Catherine Cleary

So, this will be the PCF is the project commitment fee.

00:21:05 – Pete Aston

Oh yes.

00:21:07 – Catherine Cleary

So today we’re recording on uh on Tuesday, the 24th of June, and so today’s the closing period for the final consultation on the PCF. So, it is not a sure thing. So, there’s quite a spit of industry opinion on whether the PCF is sort of needed or not.

00:21:30 – Pete Aston

There’s quite a few WACMs, I think, floating around.

00:21:32 – Catherine Cleary

Yeah, there’s two WACMs, so both of which are some…

00:21:36 – Pete Aston

Alternatives, I suppose?

00:21:37 – Catherine Cleary

Two alternatives, yeah, sort of which, both of which would still involve some kind of Project Commitment Fee. And there is a, you know, the work group was sort of split, kind of almost 50-50, in terms of whether actually we should just not implement this at all. So, it’d be quite interesting to see how that goes. Roadnight Taylor will be responding, but I’m sure lots of listeners will be too.

00:21:55 – Pete Aston

So, the work group’s closing, and then there’s going to be a consultation.

00:21:57 – Catherine Cleary

Sorry, the work group has done their report. There is a consultation, the consultation closes today.

00:22:02 – Pete Aston

Oh sorry, the consultation closes today.

00:22:04 – Catherine Cleary

So that’s the co-administrator consultation, and then we would expect a decision in the Autumn by Ofgem.

00:22:09 – Pete Aston

Right.

00:22:09 – Catherine Cleary

So that one will have been decided by the time Gate 2 offers go out.

00:22:16 – Pete Aston

Yeah, okay, the one where NESO gets lots of money is going to be decided by Autumn. Sorry, is that me being cynical? Maybe no comment on that one. Any other points to bring up, any other Code Mods going through?

00:22:28 – Catherine Cleary

I’m sure there are lots of Code Mods.

We’ve probably done enough CUSC.

00:22:32 – Pete Aston

I think Abi’s probably going to shout at us to say stop soon.

00:22:28 – Nikki Pillinger

Maybe one more thing.

Just another kind of plea for people to please get their Gate 2 submissions in. I don’t know when this is going to go out, but please get that done as early as possible.

00:22:47 – Pete Aston

Probably, by the time this podcast goes out, you will only have a few weeks.

00:22:52 – Nikki Pillinger

And the 29th of July is my birthday, so please no submissions on that one.

00:22:57 – Catherine Cleary

No submissions Nikki has to do.

00:23:00 – Pete Aston

And I guess everyone can go on a holiday in August.

00:23:01 – Catherine Cleary

Yes, from the 6th of August. So yes, NESO have confirmed that they will, especially if you’re submitting at the end of that window, they might come back to you and ask questions about your basic checks up until the 6th. So don’t go, make sure someone is available.

00:23:13 – Pete Aston

Yeah, yeah, after 6th of August, go on holiday for a month before the madness starts again in September. Right, with that, thank you everyone for listening. Thank you, Catherine and Nikki, and we’ll see you on the next episode thanks.

00:23:26 – Nikki Pillinger

Thanks Pete.

00:23:28 – Catherine Cleary, Nikki Pillinger and Pete Aston

Bye!