Podcast: Reviewing Gate 2 offers

00:01:09 – 00:01:17 – Pete Aston

Hello and welcome to another Roadnight Taylor Connectology® podcast. I’m Pete Aston, one of the engineers here, and I’m joined by Kyle Murchie and Alex Ikonic. Welcome both.

00:01:17 – 00:01:18 – Kyle Murchie

Hello.

00:01:18 – 00:01:18 – Alex Ikonic

Thanks.

00:01:19 – 00:02:13 – Pete Aston

And thank you everyone for joining in and listening.

Today we are going to be talking about Gate 2 offers, so really this is a, trying to pick up on, top tips for what to look for in a Gate 2 offer top tips for things that might need to be looked at that aren’t in the Gate 2 offer, that sort of are impacts on the viability of the Gate 2 offer – so, it’s picking up on all of that.

So, we’re expecting Gate 2 offers to sort of be coming out by now and, you know customers will be starting to look at these offers and trying to work out whether they should accept them or not. So yeah, we’re going to into that a little bit, see if we can provide some, sort of help to the wider, industry on the sorts of things to look out for.

So maybe I’ll come into you, Alex, first. Anything that sort of jumps out to you as to what needs to be looked at from these Gate 2 offers?

00:02:14 – 00:02:50 – Alex Ikonic

So, I guess the kind of key, the bit that you want to look at first is what is the acceptance period? So, we are expecting that transmission offers are going to have three months to accept, but you will have to submit any queries that you have in the offers in four weeks, I think they said. So yeah, you just going to need to be careful to act quickly on that and review your offer, you know, make sure does it have all the requirements you were expecting has a lot changed from your previous offer. And for distribution offers, we are expecting about four weeks, although it might vary between DNOs, we’ve heard.

00:02:51 – 00:03:57 – Kyle Murchie

Yeah, I think that’s the tricky one, because, you know, at the moment there’s quite as much coordination, you know, maybe by the time this has gone out, there’s maybe some coordination, around the community.

But because I, we can understand where the four weeks comes from, because they’ll obviously be giving an offer from NESO, they’ll only have maybe three months. Importantly, securities as all the conversation about, you know, 30 days effectively after acceptance. So, they have quite a short timeframe to turn everything around. But there’s maybe a bit of an argument of whether, you know, it’s four weeks a little on the, the short side, could it be six or eight weeks? Maybe not the full three months.

And I was thinking that one of the first things, you know, even if you don’t have all the offers out now, it’s just doing that kind of sense check of, well, when do I think the offer is going to come out? And which ones do I think are going to be the most challenging? Because if you still had issues back before reform started, then those issues are probably still going to be inherently there, so how much can we do now to try to, to mitigate and consider?

00:03:58 – 00:05:02 – Pete Aston

So, I guess in terms of, developers looking to prepare themselves for the Gate 2 offers coming out, one of the things is going to be making sure you’re ready to act quickly; I guess that’s the sort of takeaway from this timescale issue.

Transmission offers a bit more time to accept the offer, the three months you’re saying? But obviously they’re more expensive, you know, more, more liabilities and so on, so, a much more significant piece, but the DNO offers maybe a bit, you know, cheaper, less liabilities per really short time period.

And, so I guess developers are going to need to have all the, all the resources in place so they can, they can turn this around quite quickly. I think we’ll probably circle back to the time piece in a minute as we work through some of the other things that need to be checked, because certainly feels like four weeks is a little bit on the tight side.

So, Kyle, within the offers, what are some of the, you know, pick up a key thing that you’re going to want to have a look at?

00:05:03 – 00:05:03 – Kyle Murchie

Oh God, where do you start. I mean…

00:05:04 – 00:05:05 – Pete Aston

You can only have one to start.

00:05:06 – 00:06:17 – Kyle Murchie

Yeah. I think if your DNO offers, the first thing is to understand is what is changing? You know, we hear about DNO offers as, you know, whether it’s now or even in the recent past, and whether it’s variation, is it an offer variation? You know, people will be quite, you know, understanding what variations look like. They’re normally obviously quite sharp, short, sharp, and to the point. So, you’ve got your offer and then you’ve got your variations that build on top of that.

So, is this another one or is this effectively, you know, irrespective of what it’s called, but is this a new offer? Because if, you know, some DNOs are talking about doing cost up updates, some of those could be cost updates based on latest framework prices, as well as taking into account, either changing the solution or inflation, everything else.

So, if, but if your cost change, if you are point of connection changes, even if it stays the same, there could still be kind of some, some of the detail that changes your date obviously could therefore change, does the template in which it’s based on, has that changed since you had your offer in original offer in 2022, template completely change, of course milestones will have changed.

00:06:18 – 00:06:18 – Alex Ikonic

The new milestones.

00:06:19 – 00:06:33 – Kyle Murchie

So, before you know it, you’re sitting in front of a brand-new offer. So, it’s, I think therefore thinking about it as a variation, some will be very much a variation and relatively straightforward. But others we are expecting could be quite, quite different.

00:06:34 – 00:06:43 – Pete Aston

And is there a risk, Alex of, in DNO offers like the point of connection changing, do we think, or DNO is likely to keep the POC the same or do we not know?

00:06:44 – 00:07:18 – Alex Ikonic

I think it will definitely vary between offers. I think we will see some offers that do have points of connection that’s changed, it’s probably more likely that they’ll have the, the GSP that changes.

So the, the GSP connection, which is related to the statement of works, so potentially we might find that a GSP, a new GSP isn’t needed and that it’s going to connect to an existing GSP, which, you know, could be further away, could be more costly in the end, or could have restrictions, it could be under ANM, so yeah, we definitely do use …

00:07:19 – 00:07:38 – Pete Aston

Yeah. So, yeah, I guess if there’s one of the, you know, if your DNO offer has been to a, you know, such and such a connection, node substation that doesn’t exist, and then they now go, oh yeah, we don’t need that anymore; you’re back to some other GSP and like you say, it could be further away, which is an interesting thought. That is technically that an overall best solution, but it costs money.

00:07:39 – 00:07:41 – Alex Ikonic

Yeah, for the individual project; it might not be the, the optimal one.

00:07:42 – 00:08:50 – Kyle Murchie

Yeah. I’m just thinking about transmission level, obviously for projects that are 26, 27 and protected under clause 1 or 2A should be, there shouldn’t be any changes in theory.

There probably will be some subtle variations that may be happening for, for various different reasons, but effectively, you know, we’re not expecting major changes, but certainly later projects, because many projects have nodal names, you know, node, I was going to say Z, maybe that’s a little bit far, you know, node B, C, D in, in a particular location. And the idea, certainly the concept has always been that those will be firmed up, there’ll be a much clearer view of what that is, and therefore a bit of a coordination of, oh, we don’t need a, you know, A, B, C and nodal, kind of set up. We’ll have one substation, this will, where it’ll be, so for those projects, and most of them are probably slightly later, you know, 2030 and maybe beyond, but certainly for those projects it could look quite, quite different, yeah.

00:08:51 – 00:09:21 – Pete Aston

With a DNO offer, are we expecting the DNO offer to include a sort of, the detail of the transmission works required. So, they’ll obviously have all the DNO works and like we’ve said, might be some variation on actual work scope or costs or whatever, but they should say the transmission works are, you know, X, Y, Z and here’s your actual costs for towards this and your liabilities and securities. We’re expecting all that to come in, are we?

00:09:22 – 00:09:48 – Alex Ikonic

Generally, yes. But I do think we’ll see some instances where the DNO maybe isn’t able to provide all that information. So, we are expecting there will still be some nodal substations, you know, some new GSPs that are still needed. And in those cases, the DNO may still need to do some extra detail design, you know, a couple years from now to find the location of that GSP to work up those extra costs. So I think, yeah, those clauses are here to stay, unfortunately.

00:09:49 – 00:10:30 – Kyle Murchie

And just like we, see offers at the moment that still have, you know, this is a variation based on the requirement to do another Mod App, you know, so this is a Mod App between the DNO and NESO for various different reasons, whether it’s database changes or as you say, substation changes or, or new substations being built; but those Mod Apps haven’t happened, so, if they don’t happened and aren’t able to happen now, they’re not going to happen until you’ve accepted your offer.

So, really, you know, we could still be quite a way away from that level of detail really being known. So yeah, unfortunately, while there should be out this process, a lot of additional certainty doesn’t remove some of the uncertainty for, for a number of cases.

00:10:43 – 00:11:03 – Pete Aston

Mm-hmm, just thinking of some transmission offers now, obviously transmission offers will come out with different categorizations of works, one-off works, connection asset works, enabling works, and then sort of the way that that’s built up into your connection charge and securities liabilities and so on, are we expecting all of the offers to be perfect?

00:11:08 – 00:12:26 – Kyle Murchie

I think if you’ve been in the industry for more than five minutes, we’ll go that best will of intention then, you know, the quality could be high, it is interesting, and I think this is the point around quality. When we talk about quality in, you can, from our perspective of the industry and from a developer’s perspective and user’s perspective, you know, quality isn’t necessarily just making sure the spelling is correct and making sure the format looks pretty, you know, it is much more about is the technical detail correct? Is there challenge as well? And just kind of that sense, checking against what the TO was put forward.

It’s one of the big reasons why, you know, we and, and many others say we do need some information published, you know, tech register one thing, but you know, TO reports, just transmission works registers, all that type of thing updated; because there needs to be that sense check, you know, when you get an offer, I suppose the danger is, well, you have to challenge everything. If you have no other information around you to really allow that to be done accurately, then you obviously have to go back to the TO and the NESO to do it.

Publishing information allows a bit of sense, kind of, self-processing, self-management, and then therefore the queries that come back and those T queues that come back be much more measured.

00:12:27 – 00:12:46 – Alex Ikonic

Yeah, and I think that’s a really important point in that, you know, no one should expect all the offers to be perfect – that’s not realistic. But I think just having that avenue to have those discussions with the DNO or NESO, the TO, if you do spot any mistakes and being able to rectify them in, you know, appropriate time skills. I think that’s kind of what the key bit is for me.

00:12:47 – 00:13:35 – Pete Aston

And for some transmission offers that I’ve seen, so some of the things that are often a bit questionable, and that you need to dig into, is like trying to tie up the works in the s-curve compared to the works in the construction agreement appendices and going can’t, they don’t have all the same project numbers here and I can’t quite tie them up.

Or the works for this bit reinforcement says it’s going to lead to this much additional, you know, new capacity on the circuit, but that’s not what it looks like has been used to calculate the SIF for this, for this factor for my securities or something. So, it’s, you know, it’s quite, there’s quite a lot to dig into and, you know, admittedly quite they’re complex and quite a lot that could go wrong. So, there’s, it’s challenging I think to do all that within three months.

00:13:36 – 00:13:37 – Alex Ikonic

Absolutely, yeah.

00:13:37 – 00:15:15 – Kyle Murchie

Particularly when you think about transmission offers and the number of appendices and obviously they mature over time, you get different versions, you know, we were talking earlier about a version that was now on like version 23 or something like that, you know, so BCAs do change over time, but every version isn’t a full suite of all the new documentation.

But with this type of change, you know, we do end up with a new substation name being mentioned, maybe clauses, like technology based clauses coming out or going in, hopefully it’s coming out, you know, we could end up with actually most appendices all being updated and the, you know, the BC and the construction agreement being changed as well. So really, you’re then starting with almost a back to day one type level of detail, all leading to be removed and can go through.

So yeah, I think for me it’s the review and being prepared for it, but it’s also then thinking about what are the key challenges for my project. If you’re quite certain that point connection’s not likely this change, you’ve got a connection and not to this in future, a lot of that’s been progressed with already then is it costs, you know, is it costs certainty that’s going to be the problem, you know, if there’s costs in there that are significantly higher; we have seen as we know, transmission connections that’ve seen 50, 60, 90% sort of level of increases, then, okay, well what is that? Has that changed? And how do we challenge that? Because yeah, that might not have changed significantly for the better, and how does that allow you to move forward to FID?

00:15:16 – 00:15:19 – Pete Aston

What else? There must be loads of other things for, for Gate 2 offers.

00:15:19 – 00:16:41 – Kyle Murchie

For Gate 2 offers, yeah, I mean, that’s, I suppose it’s for me, one of the other things is thinking about, yeah, costs, obviously as we’ve just kind of mentioned timescales and the implication of, well, what are you agreeing to? But then what’s next? I think that’s, we were talking about that earlier. What is the next step? As soon as you get the offer and you’re maybe reviewed it and you’re in a comfortable position, what do you do once you’ve accepted is it a, oh, that’s five years away, let’s put that on the shelf or do we need to be getting the phone and starting to have conversations because is a DNO connection 132kV tower works that might not be part of your connection, but might be part of the reinforcement, has a DNO started that? Are they waiting for you to give payment? Has the TO progressed their design? You know, lots of TOs have kind of gated sort of windows and processes as well. Are they saying, well, we’ve done a gate, what, zero paper, but not progressed anything because you haven’t asked us to.

And particularly with reform, I think there’s a lot of opportunity for these pauses to happen. And I think for me it’s then get to the point where you’re really confident that you want to move that project forward than actively try to move it forward, which I know is easier said than done if, if the communication channels are limited.

00:16:42 – 00:16:50 – Pete Aston

And what about timescales at transmission, Alex, because we were talking earlier about how some of them seem sometimes quite optimistic.

00:16:51 – 00:17:41 – Alex Ikonic

Yes. I think, yeah, that there’s still a lot of work that needs to be done, and I think even on the developer side you still have to go through all the detailed design and the procurement as well. So, a lot of these projects that we’ll see come out of Gate 2 will be, you know, quite chunky projects, you know, 500, 600 plus megawatts, and if they are delivering over the next couple of years, they’ll have to think about supply chains and, you know, long lead items. So, transformers and even switchgear that we’re seeing kind of have much longer delivery times than we have in the past.

And yeah, you know, if you’re contracted to meet a certain date, I think it will be, it seems to be, it’ll be a lot harder in the new will to sort of postpone your connection dates, so you need to be a fairly confident that you can meet the date.

00:17:42 – 00:18:34 – Pete Aston

But yeah, I also think on the flip side of, you know, you as a developer need to be confident you can deliver the date that’s there. But you know, on the flip side, I guess you need to have some sense as to whether the TO is able to deliver the date that’s got put in the offer as well because, you know, if you’ve got an offer that’s, you know, new 400kV connection in two years and no work has yet been done, that’s not going to happen is it?

So, it’s, it will be interesting to see what the sort of timescales are that come out. Because you know, if you’re a developer and you’re, you know, working really hard to try and deliver a connection date that then the TO can’t actually deliver; because it was an unrealistic date in the offer then, then that, that is a mismatch of sort of effort then, TO and developer really want to be, I guess, ramping up effort at the same time to deliver on a, on the same date.

00:18:35 – 00:19:36 – Kyle Murchie

Well, we talk about the compliance process. You know, even NESO says 18 months minimum before energization, and to start that compliance process, you have to have a design, you have to the TO has to be engaged. They would normally have a, you know, several engineers, if not the SAP on the meeting from gone with day one and that’s what, 18 months to two years before.

So, if that’s happening, then before energization, you’ve had at least another year, if not more beforehand. So, you know, if you’re connecting to NGET in a nice fresh bay and it’s sitting there all nicely polished, ready for you, you know, it’s a kind of skeleton bay, you can move straight in. You know, three years is maybe doable, but you know, it wasn’t that long ago we were still talking about five to seven years from kind of acceptance in a reasonably quick moving project; you know, not the fastest, but at kind of general pace would be five to seven years, which yeah, is quite different, as you say, from some of the timelines we’ve seen most recently.

00:19:37 – 00:20:14 – Pete Aston

Mm-hmm. And then I guess there’s a sort of with all these Gate 2 offers there’s a slightly bigger picture piece as well. So, there’s the, my, I’ve got my individual offer here, you know, and review that, that’s really important. But as an industry, I guess there’s a wider piece, isn’t there to go — has this been put together sensibly, you know, is my connection really in the place should it, should it be in this substation and not this one? And have we got any sense about how the industry can actually hold, you know, NESO and the TOS to account on, on that sort of thing?

00:20:15 – 00:20:32 – Kyle Murchie

Yeah, well we were talking about that earlier, weren’t we? Around kind of data sharing and the benefit of that, it’s not, it’s not just us as a community saying we want more data, we want more visibility of information so that we can, you know, challenge from a negative point of view. That data could be used from a positive, couldn’t it?

00:20:33 – 00:20:34 – Alex Ikonic

Yeah.

00:20:35 – 00:21:23 – Kyle Murchie

So yeah, we could, you could take that data and say, okay, we know that we’ve been given a date in 2027, but everybody else has been given a date in 2030 and the substation is not going to be built until 2029. So how do I connect in 2027? You know, that sense check if you’re just looking at your offer in isolation, it’s very difficult to know unless you’re communicating with a TO and really challenging that day in, day out, which is not efficient. At least if you had a register and some additional information, you could do that sentence check and go, right, someone’s just put the wrong number in, you know, hey, it happens, let’s be grown up about it, let’s get it changed, sorted. Whereas if that doesn’t happen, then yeah, a lot, much less efficient process.

00:21:23 – 00:21:40 – Alex Ikonic

Yeah. And also, potentially identifying like coordination opportunities like with other developers. So, if you have a few projects in the same area, you know, you could, see if you can install like a hub substation for a few projects, which, you know, might be preferable for all the developers.

00:21:41 – 00:22:20 – Pete Aston

It is difficult for any individual developers to get that sort of holistic view. And, you know, we’re, we’re obviously expecting NESO and the TOs who have done that job, you know, as well as they can. But there’s also, there’s always the sense in which a challenge to that is a good thing, but it’s quite difficult to, so it’d be interesting to see how that plays out and looking at that, you know, big picture view and then certainly, you know, feeding in demand into that because you not only maybe want a hub to collect a few generators into, but maybe you could, there’s a couple of demand projects that could connect into that hub as well. But that’s all sort of, isn’t it, potentially up in the air as well.

00:22:21 – 00:22:44 – Kyle Murchie

Yeah, I was just thinking, Alex, you were talking earlier actually about Mod Apps, just when you were speaking there about potential coordination and changes. That’s a good point because all that would require a Mod App, but also, I’m sure there’s plenty of projects sitting right now going, I haven’t sat still for the last year I’ve been doing something. So do we see that as being a bit of a next hurdle?

00:22:45 – 00:23:27 – Alex Ikonic

Potentially, yeah, so yeah, like you said, these projects will have been doing kind of internal development, you know, potentially even going through planning or choosing different inverters or turbine sizes, doing that detailed design, which could mean that they could need a Mod App, which obviously they couldn’t do because of the application pause.

So yeah, they’ll obviously have to wait until the next window, it might be, at some point next year, mid to late next year; that’s probably what we’re expecting, and yeah, they’ll obviously have to comply with the new, NESO guidance on, you know, whether it is a gated Mod App or a allowable change. So, there are, there are additional things that these projects will have to think about.

00:23:28 – 00:24:25 – Kyle Murchie

Yeah, which is, could be quite a big impact because if you, if we’re just thinking about a project that maybe could be a 2028, 2029 project. It’s already potentially a little up against it from a build out perspective, particularly for dump transmission.

And then you go, right, we’ve done a lot of additional work, but we need to make a Mod App. If that process has to go through the gated Mod App process, which is what, about kind of nine months end to end, that’s a huge, you know, nine months end to end before you’ve actually accepted something new – that’s a massive impact. You know, it really just pushes everything out by a year. And then who takes that risk? Is it, you know, where are you then in the milestones and then and from delivery point of view.

So yeah, I think we need to, as an industry, if we’ve not already, things move up quite a fast pace, but for me, that’s one that we need to resolve so that changes like that can be made much, much more quickly.

00:24:26 – 00:24:38 – Pete Aston

It feels like we’re coming to the end of this. We’ve been waved at to, to cut the podcast short, anything else to add in before we stop? It’s going to be really important.

00:24:39 – 00:24:50 – Kyle Murchie

I think everything’s the, the challenge is there are, are so many things, but I think with what we’ve just discussed now are probably some of the key kind of takeaways that everybody can consider, I think across all projects.

00:24:51 – 00:25:30 – Pete Aston

So, it feels like some of the key things that we talked about to summarize and chip in, if, if I haven’t got this right, obviously cost is going to be really important, and where are the costs coming from? So, is it a change in scope or just an inflationary increase, and then have we got like the right categorization of costs across projects? You know, have we got the right one-off works and connection asset works and reinforcement and enabling works and so on. Then we’ve got timescales issue, you know, what, how far out is it moving? Securities, liabilities, they’re some of the crucial things, aren’t they?

00:25:31 – 00:26:02 – Kyle Murchie

Yeah. And then think for the TOs, the networks, they then, they ask really is sharing of information, you know, trying to make it as easy as possible so that it’s not sharing of information, you know, again, as we said, as a negative, because that’s, sometimes there’s negative connotations of what’s that information being used for, et cetera. But generally speaking, it’s to actually help the networks in a lot of cases because it creates a lot of inefficiency if we don’t have that visibility. So that would be a real ask that between now and actually that continuation of continually developing through 2026 is going to be really the key.

00:26:03 – 00:26:28 – Pete Aston

Well, no doubt we will have to do another part of podcast when we’ve got the first Gate 2 offers in our hands, and we’ve had a proper chance to look at the real thing. But we hope this was, useful for listeners, thank you for tuning into another episode and, we look forward to seeing you again on the next episode. Goodbye.