Update on the two-step offers process for connections

David Wildash, Interim Director of Engineering and Customer Solutions at the ESO, writes about the latest developments on the Two-Step Offers process:

The connections process was first developed at a time where a small number of large power stations met Great Britain’s electricity demands. Today a much larger number of smaller units now form part of one of the fastest decarbonising electricity systems in the world. Whilst this is a huge success story, the connections process has not evolved at the same pace and has become cumbersome. To deliver more clean, secure power to homes and businesses across Great Britain, the connections process has to become fit for purpose.   

That’s why the ESO has taken a leading role in tackling this issue. The ESO has developed a range of short-term proposals, working with the Government, Ofgem, Transmission Owners and the energy industry to develop a structured programme to determine what longer-term reforms are required to modernise and accelerate the connections process.  

It was almost a year ago that the ESO launched its five-point plan to bring forward short term initiatives to clean up the connections queue and speed up the rate at which viable projects can connect to the transmission network. 

To date, through this plan and support for wider industry initiatives, the ESO has facilitated the acceleration of 40GW of connection offers and the removal of 4GW of stalled projects from the queue via the TEC amnesty.  

From 1st March 2023 all applications to join the transmission system received in England and Wales followed a new two-step process. Working with National Grid Electricity Transmission, the purpose of this process was to reduce uncertainty for developers in the longer term as we applied new background modelling and storage assumptions, with the expectation that this would deliver outputs that would enable customers to have an improved connection date when receiving their second step offer. The process also helped to create space to work with industry on wider connection reforms.  

During this time, the GB connections queue has grown at unprecedented pace, with 49GW joining the Transmission queue in January 2024 alone. On current trajectories, the connections queue across Transmission and Distribution could reach 800GW by the end of 2024 – over four times the volume required to reach net zero.  

This sustained increase in projects joining the queue meant there were over 150GW of new connections requests spread across 500 contracts requiring two-step offers – over double the original estimate. 

Despite some projects in the queue having no intention to build, the current connections process means all projects are treated as viable, meaning connection dates are affected by associated transmission reinforcement works. 

As a result, and as second step offers reached the advanced stages of assessment and processing it became clear that the anticipated benefits would not be delivered, with approximately 60% of customers receiving a later connection date.  

Recognising that this was not an acceptable outcome for customers, the ESO has worked with National Grid Electricity Transmission on an alternative assessment methodology for considering wider system enabling works, aligning with the forthcoming outcome of the Transitional Centralised Strategic Network Plan (tCSNP). 

This action will improve the range of second step customer connection dates overall. It means 60% of customers will receive a better or aligned date to their first step offer. At this point in time, 40% will receive a date beyond their first step offer but we are working to see if these can be further improved. 

The regulator, Ofgem, has approved a three-month delay in finalising the two-step offers process so that we can implement this new approach. We will start to issue second step offers from this week, with the commitment that all second step offers will be issued by 31st May 2024. 

Whilst the two step offer process was one of a set of short term initiatives that have been implemented, we recognise that the outcome of this process is not what was envisaged at the outset. The outcome will be hugely disappointing to our customers, who were rightly under the impression that their second stage connection dates would accelerate. 

The ESO will continue its collaboration with the Government, Ofgem, Transmission Owners and the energy industry to deliver long term reform to the connections process. With enduring, impactful reforms, the connections queue can be unblocked and Britain can keep building to deliver net zero.