Despite negative commentary on the state of the grid, connection challenges and the barriers this presents for decarbonising real estate, significant change is afoot when it comes to linking new developments to power sources.
The National Energy System Operator’s (NESO’s) Grid Connections Reform, coming into effect in Q2 2025, promises to rip up the rulebook and mobilise the grid connection space. While a daunting undertaking, this could be good for real estate.
The reform is a critical piece of the jigsaw to enable the UK to hit its net zero targets. It will hold to account projects that can influence the transmission network and reward those making progress with a better connection offer. There will be no more ‘first come, first served’ and no prizes for ‘slow and steady wins the race’; projects that stop moving forward will be prevented from holding on to valuable resources, opening up opportunities for those actively progressing – a ‘first ready, first connected’ approach.
The reform does not yet apply to smaller rooftop solar power projects; applications for such schemes will still be made through the distribution network operator (DNO), following the same grid connection process as before. It also excludes embedded demand, such as electric vehicle charging hubs and heat pumps. Some commentators believe this is a significant omission.
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Grid connection reform is a critical piece of the jigsaw to enable the UK to hit its net zero targets
The risk comes for those embarking on, or under way with, larger projects such as at retail or logistics parks. The DNO escalates such applications to the transmission network for further evaluation, making them subject to the reform and a two-gate process. At gate one, projects receive an indicative point of connection; at gate two they receive a connection offer, but subject to meeting certain criteria. These include demonstrating sufficient land rights and being deemed ‘needed’ to achieve the goals of Clean Power 2030.
Electrifying changes: new rules for grid provision could accelerate the connection of big developments NESO has divided the electricity network into geographical regions and determined the required amount of each technology necessary to meet Clean Power 2030 targets. A project is considered ‘needed’ if there is a shortfall of technology types in that region. Failure to meet gate-two requirements takes you back to gate one; this will also apply to projects in the pipeline when the reform takes effect. If projects qualify for gate two, they keep their connection offer; if not, they risk losing it. Time is of the essence.
To ensure smooth navigation through the new requirements, it will be necessary to work closely with DNOs, keeping an open dialogue, monitoring application statuses and addressing issues well before deadlines. Inertia will lead to projects being eliminated from the race altogether to make way for those who are more proactive.
A more complex and expensive process
What constitutes a ‘larger’ or ‘smaller’ embedded project is up for debate; currently 1MW is the project threshold to be subject to a transmission-level review, but it is indicated that this could rise to 5MW or even 10MW. Those working on projects around this threshold will face the greatest challenge. They will be bundled in with large renewable energy projects and have to navigate a much more complex and expensive process. If this leads landlords to revise plans and develop smaller projects, this could have lasting consequences in decarbonisation terms.
The NESO Grid Connections Reform is a crucial intervention in unlocking grid connections and accelerating project delivery. Projects collectively requiring more than 700GW of capacity are waiting in the grid connection queue at transmission and distribution level, accounting for over four times the installed capacity needed by 2050; half are renewable energy projects. While this sounds like good news, in reality many will never proceed.
Our advice for owners and landlords affected is to consider NESO’s regional technology ‘pots’ and make preparations now to meet new criteria. For smaller projects there is no change yet, but keep an eye out for the second consultation, particularly on thresholds, which may allow you to upsize your ambitions. Lastly, there is a call for the inclusion of embedded demand, which many claim is a significant omission that is key to Clean Power 2030 and the Strategic Spatial Energy Plan.
The reform will no doubt evolve and the property industry will need to adapt and flex to meet new requirements, but it’s an important step on our net zero journey.
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By Sophie Hall-Smith, an analyst at Syzygy Consulting
