Podcast: Grid News and Views #11

00:00:35 – Pete Aston

Hello and welcome to another podcast from Roadnight Taylor. I’m Pete Aston and I’m joined by my colleagues Philip Bale and Kyle Murchie, and we’re going to be doing a quick grid news and views roundup of things that are going on. So, we’re going to start with what else? Connections Reform. So, we’ve done lots of things on Connections Reform – recently we’ve done a webinar and then yesterday, the day before, a couple of days ago, we did a big Q&A session, which went quite well. But we think there’s probably a few other things within the Connections Reform piece that we could maybe just start giving a bit more detail on, and we’re thinking sort of around those Gate 2 applications. So over to you, Kyle, first, any sort of particular tips around Gate 2 applications?

00:01:22 – Kyle Murchie

Yeah, I think, obviously, where we are now, you know, the applications, hopefully by the time you’re viewing this, are well and truly through the process, for anyone that is still wanting to go through the process and put application in, I suppose it’s just being aware that there are quite a lot of differences between the different DNOs and their approaches and hopefully, by the point of this coming out, we’re getting into the phase of the transmission applications and you know, I think, as you said, we’ve covered quite a lot in that area.

What we are really starting to see now is a bit of a shift in focus towards what’s coming out. You know what we’re actually going to get from a Gate 2 offer point of view, and is there anything we can do now to start considering what that might look like, to prepare for it? And also, when it does come out, how are we going to best kind of negotiate and challenge, because in the best-case scenario, everything’s going to be rosy and exactly what you want.

00:01:54 – Pete Aston

Yeah.

00:01:55 – Kyle Murchie

But in reality, there are going to be some issues and challenges and how best to manage that.

00:02:31 – Pete Aston

So, how are transmission distribution Gate 2 offers going to look different?

00:02:37 – Kyle Murchie

Yeah, good question. So, at transmission level, you obviously have your suite of yeah, you can have full suite of documents and those will be updated as required. So, you’ll get an ATV effectively and…

00:02:52 – Pete Aston

The agreement to vary.

00:02:52 – Kyle Murchie

The agreement to vary.

And your documentation will change depending on what’s ultimately being impacted. So, if you don’t have any changes to certain appendices, so Appendix F, if there’s no changes to Appendix F in your kind of technological requirements from a compliance perspective, then that ultimately won’t come out and you won’t get a new one. But quite different therefore, to DNO offers, where you will get a variation similar to what a lot of projects have had before, but that variation will obviously focus on the transmission aspect.

So once the DNO has had its information and its contract through from NESO it’ll then ultimately pass that through.

00:03:40 – Pete Aston

And those variations just look like a letter, really. Don’t you know, we’re now taking this bit out of your offer and adding this bit in.

00:03:47 – Philip Bale

And depending on how many variations there are, there can be some very long letters.

00:03:49 – Pete Aston

Yes, if it’s really long clauses, we’re saying all this clause, which is two pages worth of text, is now being removed and replaced with these three pages with of text.

03:30:14 – Philip Bale

Which I think we might want to come back to around dodgy variations later on.

00:04:00 – Pete Aston

Well, maybe this is a good time.

00:04:06 – Philip Bale

Well just a quick one to go back on the CP2030 aspects. I think one of the things that worries me the most is for some of the projects which have got the much nearer term connection timescales, so those projects that are protected under clause one or under 2A, but with a connection date before 2027, mainly for those projects that are not yet in a position of financial close. So, if they’ve got near-term connection dates that they can’t actually meet, obviously CP2030 doesn’t allow you to delay your connection. And just I think there’s an element for a lot of people to think about is how do you deal with your milestones? And my view at the moment is to try and, where it’s possible, to agree changes to those milestones before going through the CP2030 process, so that you don’t ultimately be at risk of being timed out by missing milestones and having the offer terminated.

00:04:58 – Kyle Murchie

Yeah, it is this nuance, isn’t it, between what 2026 and 2027 means from a protections point of view? It’s using that to classify whether you’re protected or not to go through this part of the process and ultimately your impact on strategic alignment. But that doesn’t mean that it corresponds directly to your actual physical connection date and the milestones associated with it. The DNO can no longer meet a 2026 date, but you have that date in your offer, or as part of the independence G date, then you can still be protected under that clause 1. But of course, the DNO might have said well you know, we’ve done a survey, we need to replace that tower. It’s now not, it’s going to be pushed into 2027.

00:05:42 – Pete Aston

So, you can get the perverse thing, as I’m secure under protection clause 1, which is connecting with 2026, but I’m not connecting until 2027 because the DNO is delaying the work, which is fine, but it’s just that sort of thing could happen.

00:05:56 – Philip Bale

The concern that I have with that is that if the DNO says – but the only reason why you can’t connect in 2026 is a result of you not paying for the surveys which allowed us to do the work. So therefore, it’s not us delaying your scheme…

00:06:10 – Pete Aston

But that might be okay depending on that, all depends on the dates that NESO uses to determine whether you’re going to connect in 2026, doesn’t it? Which I think is the Appendix G date, isn’t it?

00:06:21 – Philip Bale

But also, it will depend on when your milestones will then be for those projects. So, if your project then has a 2026 connection date, your milestones will be dependent on that, and then if you then miss those dates, then it would need an agreement on both sides to vary those milestones – that’s my concern.

00:06:38 – Kyle Murchie

Yeah, and it’s worth noting as well, with that additional protection under 2A, that ultimately there is quite a big difference between 2026 and 2027.

00:06:48 – Pete Aston

It’s like one year Kyle.

00:06:51 – Kyle Murchie

But it could be a couple of days.

00:06:53 – Pete Aston

True.

00:06:25 – Kyle Murchie

But yeah, ultimately, if you’re on 2026, you do have to meet that M7 milestone, that financial close or financial investment decision type decision of which we’ve discussed before a number of different ways in which you can meet that. But if you then go under clause 2, or 2A for 2027, that’s not an immediate requirement; your milestone will still apply, but there’s not a requirement at the time of applying for Gate 2.

00:07:23 – Pete Aston

I think it’s worth saying as well about the variations that come through. Certainly, at DNO level they may only vary these connections in relation to the transmission works. So, it’s possible that everything else could stay the same. So, if your offer came out three years ago and you know that there’s going to be a cost increase because of inflation, it may be that the DNOs don’t change the cost in the offer. So that’s the sort of thing to be aware of when reviewing these variations that are coming out to go – the cost is still really low, but actually it’s probably not because they just might not have had time to vary that bit.

00:08:05 – Philip Bale

And we’ve done a podcast not so long ago around the ETR 130 clause, around technical limits. I think it’s a recurring theme at the moment that we continue to see some variations that come out which I think we would describe as being dodgy, or stealthy, around adding in additional terms that weren’t in the original offers, which are quite asymmetrical. So, I think it’s just one of those things that if you have a variation that’s issued from a DNO, I think there’s an element of pragmatism around – is this variation needed in order to facilitate the connection but also just making sure that the terms in the agreement are reflective on where they should be.

00:09:12 – Pete Aston

I was just going to say on ETR 130, that would those causes were specifically related to battery schemes, weren’t they? So that’s, if you’ve got standalone solar or something else, that’s not really going to be an issue, but it is for battery schemes. So that’s something to watch out for batteries.

00:09:04 – Philip Bale

But as a recurring scheme, we are seeing some of the clauses that are coming out which relate to any scheme, which is a significant departure away from the terms and conditions that were originally agreed for those schemes.

00:09:16 – Kyle Murchie

Yes, so for variations that are going to come through for DNO offers, they are going to be potentially quite complicated then, because you know we’re talking about additional clauses that you wouldn’t necessarily be expecting. If you’re really focusing on the transmission aspect, you might not be expecting that kind of additional clause coming in, sneaky under the radar as you described it, we might be in a situation where costs haven’t been updated. Now we are aware that there’s an, I suppose expectation that there will be an outcome from the end-to-end the Ofgem’s connection, end-to-end review, which will hopefully, certainly we are hopeful, that it will put additional requirements on DNOs and TOs and NESO so that when those offers come out there might be an extra requirement where costs have to be updated and be more reflective, for example. But we also don’t know what that looks like yet and while there might be an opportunity to do it, there’s also that timescale issue, you know we were talking the other day about, when DNO offers might be coming out. Some of those early ones might be as early as September, October time, which doesn’t give us much time, and the DNO as much time to really meet.

00:10:25 – Pete Aston

And the other thing is we’re not quite sure yet, are we how long the offer acceptance period will be, or do we know that?

00:10:31 – Kyle Murchie

No, it’s a good question and there had been a bit of talk about different timescales. You know whether it was the standard three months or whether it was one, you know, it was generally, we’ve seen quite a few occasions where there have been restricted timescales. You know, quite recently when offers have been coming out they have been restricted because Connection Reforms happening, so you’ve got less time to accept your transitional offer. So, it is a good point as well. But actually, you know whether it was one month or three months and also if you’ve got a portfolio of projects, even three months is quite difficult to have that conversation and get anything changed. You know it’s difficult today, it was difficult five years ago.

00:11:11 – Pete Aston

So basically, yeah, whenever that Gate 2 offer comes out, you’re going to need to be on it pretty quickly, looking at it, drilling into it, working out, yeah, and if there are any questions with the DNO, getting back to them as soon as possible. Bearing in mind the DNO’s are probably going to be a little bit busy at the time, they might not have that much resource to actually engage with questions.

00:11:36 – Philip Bale

I mean on that, I’ve dealt with two different DNO variations this week alone. Both of those had a seven-day acceptance period for them, which is incredibly short. By the time that the developer receives it, they pass it to their grid consultants, their grid consultants review it, we then have a debrief call, we then go back to the DNO to ultimately go back and engage on it, as decided as to whether the variation is acceptable, one of which was, or on the other one actually, there was a lot of things that needed to be reviewed on it.

00:12:01 – Kyle Murchie

It’s a good point actually, because we’re talking about variations there that been driven by CP30, Connection Reform and the very, very tight timescales that we’ve got; that’s why those seven days. But we might then end up with projects where they’ve ultimately had to accept that variation to be able to flow into the Gate 2 process but not be fully resolved. You know, we’ve seen that as well between distribution networks and NESO, there were disputes in a lot of those contracts for the remaining unsigned. The resolution is transitional offers but that doesn’t necessarily mean that those issues won’t still remain in the future. So, you know that’s between those parties, but that will obviously flow onto the DNO connection offers.

00:12:45 – Pete Aston

So, there’s probably a few other things we need to move on to, but it might just be worth reiterating about the Gate 2 applications that are going to go in. Just a few points on there, like the plans that go in, need to be really clear – if you’ve got lots of different land parcels, lots of different land agreements, you might want to put in a plan that’s showing all the different land parcels, the options and leases and freeholds, whatever. You might want a covering letter going – here’s a summary of all the information I’m putting in and here’s how it all ties together. So, make the job as easy as possible for the DNOs and NESO, I think is really important.

00:13:30 – Philip Bale

Agreed.

00:13:31 – Pete Aston

Kyle, I think you wanted to raise a point around data and the existing agreement register that is going to be published after the Gate 2 application when they close. Do you want to talk us through what the existing agreement register is and what it might not contain?

00:13:52 – Kyle Murchie

So I think there’s been a lot of talk about data, particularly through some of the working groups, and then even till late last year, early this year, again focus on what information is going to be coming out and how you can use that to effectively help deliver you know, help define what your queue position is and then therefore understand, before you get your offer, where you’re going to be in the queue, what the outcome is going to look like.

Now, where we are now with a lot of those requirements effectively not put in as a requirement, Ofgems’ decision is that there’s an expectation that there’ll be an existing agreement register and a year register of some description, but that it’s expecting an expectation that that’s part and parcel of their existing license condition. There doesn’t seem to be anything over and above at this moment in time, but by not being all that specific, it has meant that there’s a bit of a grey area on what exactly is going to come out and how useful I suppose it is going to be for developers, you know you might get, because I suppose it’s worth noting that it does require you to opt in or effectively opt out. You could be in a situation where, if you don’t want your information to be published, you can opt out and therefore…

00:15:09 – Pete Aston

Do you know if it’s an opt out or an opt in?

00:15:12 – Kyle Murchie

It is a good question. I was thinking about that. I think it is an opt out.

00:15:16 – Pete Aston

Opt-out is better. Because you might forget to opt-out and then thought you’re in.

00:15:21 – Kyle Murchie

But it still gives an option, which would then mean that that information wouldn’t ultimately be available. So you could therefore find that, yeah, you might know where you’re sitting in the process and then you’re going to get a Gate 2 offer, but how you’re fit around within that kind of network, geographical location might not be very clear in September, so you’d therefore have to wait for your offer to come out, to have that certainty, which there’s one about certainty, but also the ability to check and challenge. It is also a bit more difficult. So, I think anything on data, our point is we need to have more of a focus on data and probably another working group to actually really draw out what that data needs to look like.

00:16:05 – Pete Aston

Sounds like you’re volunteering.

00:16:10 – Philip Bale

And on data, just to jump on that quickly, I think it’s going to become more of a theme for everything in terms of going through. In distribution schemes in particular, we’re seeing people wanting to have better understanding around outage risks for their projects, and that’s one that really needs a very close eye, that there’s some sites that look very good on paper but in reality have some substantial risks and it’s not always particularly clear based on the published data. Needing to have that engagement with the DNOs, with the people that understand their networks around the risks. Equally, on the flip side, some of the projects which, on paper, look hideous because they’ve just had some significant outages, but in the future will look significantly better.

There’s lots of different areas around data that’s coming out. Thankfully, there is far more data being published, there does need to be focus on making sure that the data is good data that’s coming out. Yeah, in terms of power flows, is it directional, is the direction the right way around, can we rely on the data and what level of certainty there is for the data that’s been published?

00:17:22 – Pete Aston

Yeah, I think there’s just one more thing I wanted to raise, like I wanted to raise, which is just an issue around transmission connected demand projects.

So, typically when customers apply for a transmission connected demand scheme, so data centre, hydrogen electrolysis site they’re effectively applying as a sort of a private network, private customer connecting into the transmission network and they’ll get a 132kV point of supply because they can’t have a point of supply any higher because they don’t have a license.

But there are quite a few customers who are wanting to change from it being a sort of private network type connection to an IDNO connection which is actually within the CUSC – a change of customer type, from directly connected demand customer to effectively network embedded customer. And this process is not that clear and there needs to be a Modification Application made, and innovation done. NESO has sort of, you know, approved the prints in principle that this can be done and NGET is still to approve this. So just to say if there’s any customers out there looking at making such a change, it’s not necessarily as straightforward as you might think and of course at the moment you probably can’t do it anyway because you probably can’t put the Mod App in because of the pause at the moment to make the change. But if you are thinking about doing it, just need to leave enough time because it could be quite a time-consuming activity.

00:19:03 – Kyle Murchie

And of course that would apply at 38kV level in Scotland.

00:19:07 – Pete Aston

Yeah, indeed.

00:19:09 – Kyle Murchie

Could involve quite a few projects that are in that phase.

00:19:12 – Philip Bale

In addition, there’s also the same issue with some of the DNOs as well around them trying to formalise their policy around people going from being a directly connected customer to the distribution network, to being a IDNO connected process, and some different hoops to jump through and how not to make it a material change, and it feels like some of the DNOs are starting to firm up their policies on this. Just the downside is the policy isn’t in the public domain, so you have to ask, and it’s not always clear what the outcome is.

00:19:46 – Pete Aston

Yeah, so it looks like it should be really easy, but in practice it’s not. So, yeah, lots to think about on that one, maybe I have to come back to that as and when NGET sort of approves that policy.

I think the last thing I want, very last thing I wanted to say, is that if you are a transmission connected demand project, you do need to make a Gate 2 application. Don’t forget because you might just think, oh, I’ve got data centre offer or whatever, I’m okay because it’s all Gate 2 and Connections Reforms all about generation. If you’ve got a transmission connected demand project, you need to make a Gate 2 application, otherwise you’ll end up with a Gate 1 offer.

00:20:00 – Philip Bale

And that is anyone who is due to, or not going to, connect before what we think will be the end of July 2025. So, anyone that isn’t going to be physically connected within the next month or two. Then you should be putting in that evidence, if not risk receiving a Gate 1 offer.

00:20:41 – Kyle Murchie

After connecting in the next month or two, you’ll definitely know about it.

00:20:43 – Pete Aston

I think that’s it for now.

Yeah, thank you for listening again. We do hope you join us on the next podcast, but no doubt we’ll be talking about Connections Reform, again. But until then, thank you.

00:20:56 – Philip Bale

Goodbye.

00:20:57 – Kyle Murchie

Thanks everyone.