DECC published its much anticipated consultation on grid access on 25 August. This is the next step in the Transmission Access Review process and should take us much closer to an enduring solution to the grid queue for developers of power projects in the UK. New renewables developers and established generators will be analysing the consultation closely to understand its likely impact on their projects. The consultation proposes a form of "connect and manage" which gives new developers certainty of connection timescale but, rather than spreading costs across all users, it targets some of the costs on the new entrant.
The Government is proposing to use powers it has under the Energy Act 2008 to intervene and propose changes to the regulatory framework for the grid. Industry and Ofgem processes have failed to produce a result over the past year primarily due to problems in achieving consensus around how costs of constraints should be borne by the different industry players.
The Government intervention has been largely welcomed by industry who are keen for a solution and greater certainty both on how quickly they will have new projects connected and how much any costs are likely to be over the life of a project. The intention is for DECC to decide on policy in light of consultation responses in early 2010 and implement the changes needed by June 2010.
There are some key legal points for those affected by the consultation to consider:
- Scope - DECC repeatedly refers to this as a limited intervention - many broader aspects of TAR are being specifically left to the normal CUSC and other industry change management processes. To the extent that any developer believes the scope needs to be broadened, to avoid issues going back into the industry change management cycle, this needs to be clearly stated in responses. Unless developers can clearly scope and identify the specific changes they believe need to be addressed, via the DECC process, it will be difficult to influence the Government away from its limited intervention.
- Timing - linked to scope, the point here is that once triggered, the Energy Act powers endure for 2 years. Industry should carefully consider whether or not there are matters not covered in the consultation that they wish to see picked up by DECC early next year with a view to possible further intervention within the two year time limit.
- What about the election? - The Energy Act powers can be commenced without any Parliamentary procedure and therefore could be commenced even after any dissolution of Parliament prior to an election.Theoretically, therefore, it should be possible for the Secretary of State to exercise the powers in the Act and implement their proposed changes notwithstanding the calling of a general election. It is, however, common political practice not to use this type of power in the run up to an election once Parliament has been dissolved. It therefore appears that DECC's timing is dependent on the election falling as late as possible in 2010. Any decision to bring that forward significantly, e.g. into late 2009 or very early 2010, could have the effect of delaying the use of these powers.
Developers will be busy reviewing the consultation and preparing responses. As well as looking at the direct commercial impact of the proposed solution on their projects, it is important that industry thinks carefully about the timing and scope issues noted here with a view to getting as rounded a solution as possible on grid issues implemented by next summer.