Developers have until November 3 to respond to Ofgem’s ‘minded’ position to approve a Progression Commitment Fee (PCF) as part of the reformed grid connection process.
The plans that Ofgem wants to approve will see projects that accept a Gate 2 offer but fail to meet Queue Management Milestone 1, namely initiating planning permission, pay the PCF. Treated as a cancellation fee, the PCF would start at £2,500/MW and increase by £2,500/MW for every six months that a project does not progress, up to a maximum of £10,000/MW.
The National Energy System Operator (NESO) has proposed an amendment to the Connection and Use of System Code (CUSC). introduces the PCF in February as part of being grid connection queuing reforms.
It would be a way to ensure that the grid queue keeps moving after the reforms are implemented. Projects are required to provide protection against the PCF until they reach M1.
The regulator’s main reasons for approving the change to the code are that it will improve queuing efficiency by encouraging timely termination of less committed projects, ‘strengthen’ competition in electricity generation and supply and ultimately ‘ensure a ‘healthy’, efficient and competitive connection queue that is in line with the objectives of CP2030.
However, it’s not a move that many are likely to be happy with. Earlier this year, when Ofgem approved NESO’s grid connection queue review, many developers said they felt the decision was hasty and would disadvantage some projects. creating “winners and losers”.
While some solar developers were cautiously supportive of the reforms, much of that goodwill has disappeared as the process has gotten underway. First the application portal for Gate 2 connections experienced “many usability issues”keeping the window open longer and granting a reprieve when projects would receive connection offers.
The timeline for Gate 2 offerings has been pushed since then, now with developers to find out in December whether they have a connection.
As Solar Media’s Market Research solar analyst Josh Cornes wrote in a blog post Solar energy portalhave transmission-scale solar PV developers taken enormous risks over the past five yearswith millions being spent to secure grid connection offers for solar projects.
If developers wait until the announcement date for their network offerings, anyone who gets connections before 2029 simply won’t have enough time to go through the prerequisites process and construction to meet the commercial operation date (COD) that NESO assigns them.
The additional pressure of the PCF adds a new layer to this financial risk. However, it is worth noting that when NESO submitted the code change proposal, director of its liaison program Matt Vickers wrote that the additional requirement will only be triggered if projects in the early stages of the Gate 2 queue do not progress as expected “and if there are still too many non-viable projects that hinder the progress of others without being replaced by suitable alternatives.”
If a ‘trigger point’ is not reached, the PCF may never activate. Consultation documents and form to respond available from Ofgem here.
