Ed Milliband stated in June 2009 that access to the electricity grid was one of the key barriers to the generation of renewable energy in the UK. In August 2009, there was 17GW of new renewable generation capacity awaiting a grid connection1. Improving and speeding up grid access (in order to meet the 20-20-20 renewables targets2) became one of the Labour Government's key objectives.
What does the future now hold for new UK renewable projects looking for grid connections? What types of connections will these new renewables projects be looking for, and can the current network withstand the demand?
Which system to connect to: the National Electricity Transmission System (NETS) or the distribution network?
The NETS is the high voltage system (220kV and above3), which is operated by the National Grid. It transports power from the large generating plants (such as coal, natural gas and nuclear), across the country to the distribution networks.
The distribution network is the lower voltage system and is operated by eight different Distribution Network Operators (DNOs) (e.g. Western Power Distribution is the DNO for South West England). This distribution network distributes the power from the NETS to the end-customers.
Traditionally, large generating plants (such as coal fired stations in the north and nuclear stations on the coast) would export high voltage power directly onto the NETS. The power would then be transported large distances from the NETS to the distribution network and then to the end-customers.
Our UK power system is changing. We are gradually moving away from a reliance on large generating plants (which tend to connect directly to the transmission system) to increasing amounts of distributed generation. Distributed generation is the term used to describe a generating plant which connects directly to the distribution network to both import the power it requires and export the power it generates. As the generation capacity of such plants is smaller, a connection to the NETS is often not needed.
Whilst it is acknowledged that distributed generation will be a complementary part of the overall means of increasing renewable energy generation, it is still extremely important. Small projects (under 5MW) are incentivised by the recent introduction of the feed-in-tariff, which is a UK Government subsidised tariff payable for both electricity generated and the surplus exported onto the grid. It is expected that amounts of distributed generation will greatly increase owing to this new subsidy.
Smaller renewables projects therefore tend to connect to the distribution network and are classified as distributed generation projects. Wind accounts for 31% of distributed generation in the UK.4 A feature of distributed generation is that more power is used at a closer proximity to where it is generated, leading to less transmission and distribution losses. The generator can also use the electricity it generates on site (e.g. a roof top PV panel on a commercial or residential building) as well as exporting any surplus back to the grid.
Larger renewables projects may wish or need to export power directly onto the NETS and participate in the electricity balancing market. Such generators will need a connection to the NETS rather than the distribution system and will need to enter into a Balancing Connection Agreement (BCA) with National Grid. They will also need to comply with the Grid Code and Connection and Use of System Code (CUSC). Offshore wind projects are a major type of renewables project which would frequently have a connection to the NETS (although some of the earlier offshore wind projects did also connect to the distribution network). In addition, wind farms in Scotland often need to connect to the NETS, owing to a lack of distribution network in remote areas.
The decision over whether to connect to the NETS or the distribution network is largely a technical one, and will depend on a number of factors including:
- Generating capacity;
- Generating technology;
- Distribution network in vicinity of proposed plant;
- Level of security required for the connection;
- Existing use of the distribution network around the plant; and
- Any import requirements.
What specific issues do generators face when seeking a grid connection?
Connecting to the NETS
Connection to the NETS was, until recently, governed by the 'invest then connect' arrangements. Under this regime, prospective generators had to wait for all extensions and reinforcements to the wider network to be completed before joining the NETS and becoming operational. This led to a substantive queue of prospective generation, with some projects offered completion dates as late as 20255. Whilst waiting for a connection, generators also had to pay substantial costs over a long period as security for the necessary reinforcement works to be undertaken (see further below).
The UK Government recognised the above problem, and as a result the connect and manage regime was launched in July 2010. It became effective on 11 August 2010. Under the new regime, the extensions and reinforcements required to enable a generator to connect to the NETS have been sub-divided into "Enabling Works" and "Wider Works". A generator can now obtain a connection to the NETS once "Enabling Works" have been completed. "Wider Works" are then completed after the plant has become operational. The idea behind this is that connection can occur at an earlier date, thus speeding up the process.
The crucial definition for the connect and manage regime is "Enabling Works". The definition is set out in Section 13 of the CUSC. As a minimum Enabling Works must include the Transmission Reinforcement Works required to meet the criteria set out in Condition 13.2.4 of the CUSC. As a maximum the Enabling Works should not be greater than the works required to connect the generator from its connection site to a Main Interconnected Transmission System substation6. The meaning of Enabling Works will therefore vary hugely from project to project. National Grid (as the NETS operator) will have a large amount of discretion to decide where the division should lie between Enabling Works and Wider Works. The definition has been the subject of much debate and some criticism from the industry. The UK Government remains resolute that the flexible approach to this definition is the correct way forward.7
It has not yet been fully ascertained how the connect and manage regime will impact on ascertaining Final Sums liabilities for generators. Final Sums are the sums which a generator would be liable for if its connection agreement with National Grid terminated whilst extension and reinforcements works were being carried out. The generator is required to provide security for such sums up until the project is connected. After connection, the liability for Final Sums falls away and the generator pays Transmission Use of System Charges. The Final Sums security system protects the National Grid (and end-consumers) from being liable for such abortive costs if the project does not achieve connection.
Given that connection can now occur before wider works are completed, the big question is what should the Final Sums liabilities be in relation to such wider works? For the current security period (1 October 2010 to 31 March 2011) the National Grid has elected that the generators will have no liability to secure Final Sums in respect of the wider works8. Security for final sums will only be required in respect of Enabling Works. This has obviously decreased Final Sums liabilities for generators; but means that a proportion of the investment required for the NETS reinforcement is not secured by the generator. The obvious risk is that should a generating project abort, other generators may face increased use of system costs. The current decision was taken because it was felt that the wider transmission works should be seen as improvement works of a 'national asset' and therefore the responsibility of National Grid and OFGEM, rather than for generators. In addition it was felt that should a project abort, the costs spent on the necessary wider works will not be wasted, as other generators with later connection dates would still be able to make use of such reinforcements.9
Connecting to the distribution network
As stated above, the traditional approach was that power was generated and exported onto the transmission network rather than the distribution network. As a result, the distribution network was not designed to accommodate the additional capacity being exported onto the distribution network. It was designed to take electricity from the NETS at a high voltage and deliver it at a low voltage to the end-consumer. It is widely expected that demand for connections to the distribution network will greatly increase, especially given the recent introduction of the Feed-in-Tariff and the importance of distributed generation to the UK Government's overall renewables policy.
The additional capacity now being loaded onto the distribution network can lead to technical issues, relating to voltage control, fault levels and power flow management. If such issues emerge, the connection and use of system charges payable by the generator will increase.
Generators should also bear in mind that even where they are solely seeking a connection to the distribution network, the proposed connection may well have an impact on the NETS. If additional upgrade works are required, the generator will be liable for at least a portion of these and will need a statement of work from the National Grid. These works will now be carried out under the connect and manage regime which may well mean that undertaking such works does not prevent connection occurring (see further above).
Top Tips for obtaining a speedy grid connection
- Engage early with the local DNO to establish whether connection to the distribution network is going to be viable and cost effective. Seek initial meetings with the DNO and discuss plans.
- Make use of the large amount of publicly available information which enables prospective generators to assess what the opportunities and constraints may be. This can be obtained quickly and at minimal cost.
- Maintain continuous communication lines with the DNO, and consider whether to employ a grid expert to conduct negotiations. Grid experts may be able to advise you on how to reduce the need for reinforcements.
- Establish credibility through demonstrating track record and real commitment.
- The NETS Seven Year Statement (currently published for 2010-2017) contains some extremely useful information on demand opportunities.
- Monitor updates to the NETS Seven Year Statement published by National Grid. The next update is due to publish locations of MITS sub-stations which is key for ascertaining likely ambit of Enabling Works.
- Monitor closely how the National Grid is distinguishing between Enabling Works and Wider Works in connection offers for other projects. National Grid is due to make this information publicly available.
- Monitor on-going consultations and National Grid statements regarding Final Sums liabilities.