After a long period of uncertainty, you might have just received your gated offer notification this week. If you were fortunate enough to get a Gate 2 notification for any of your projects you will be keen to get the offer accepted and crack on with developing the project as soon as possible – it’s as easy as that, right? …right??
In this edition of TNEI on Grid we dive into the expected contents of the updated gated offers and give you our top tips on what to look out for.
Connections Reform Results
On Monday (8th December), NESO announced the results of the new queue formation process, with the pipeline of generation and storage projects across Great Britain (GB) cut down to 283 GW from over 700 GW pre-connections reform. Some of the highlights:
- Batteries are around three time oversubscribed compared to the Clean Power 2030 target for 2035, due to many battery projects having protected status.
- The CP30 quota for onshore wind in Scotland was filled by protected projects, but onshore wind in England and Wales is undersupplied.
- Most transmission zones for solar PV are oversupplied against the 2035 targets, but some capacity remains in T3 (Northern England), T8 (South Wales and the Severn), and T9 (Southwest England).
- 217 GW of ‘ready’ projects did not meet strategic alignment and will therefore receive a Gate 1 offer.
- 99 GW of ‘ready’ demand projects prioritised in the queue.
Both transmission and distribution customers have now begun to receive their project specific result notifications which include each project’s gated offer status, connection phase (Phase 1: up to 2030 or Phase 2: 2031-2025), and if the project’s offer is still subject to detailed checks being completed.
As a reminder, NESO’s EA (Existing Agreements) Timeline states that the timeline for Gate 2 offers is as follows:
- No later than the end of January 2026 – Gate 2 offers for protected transmission projects connecting in 2026 or 2027.
- No later than the end of Q1 2026 – Gate 2 offers for protected distribution projects connecting in 2026 or 2027.
- No later than the end of Q2 2026 – Gate 2 offers for Phase 1 transmission and distribution projects (connecting up to 2030).
- No later than the end of Q3 2026 – Gate 2 offers for Phase 2 transmission and distribution projects (connecting in 2031-2035).
Transmission projects will have 90 days to accept their Gate 2 offer, and securities will need to be placed within 30 days of acceptance. It has been suggested that distribution projects will have only 4 weeks to review and accept their offer, but this is yet to be confirmed.
With so many updated connection offers to be sent out next year, it is important that developers understand what they are signing up to so that they can get the best possible terms for their connection. Luckily, TNEI is on hand to help and has provided a short summary of what to look out for when reviewing Gate 2 connection offers.
Connection Offer Contents
A transmission connection offer (BCA/BEGA/BELLA[1]) typically comprises:
- Connection Offer Letter
- A NESO headed letter setting out the offer documents contained.
- Offer Summary Document (OSD)
- A summary of key connection details and required payments.
- Bilateral Connection agreement (BCA)/Bilateral Embedded Generation Agreement (BEGA)/Bilateral Embedded License Exemptible Large Power Station Agreement (BELLA)
- The enduring agreement for connection containing charging methodology, restrictions on availability, and compliance and commissioning requirements.
- Construction Agreement (ConsAg)
- A temporary agreement between NESO and the project, detailing the work required on the NETS to facilitate connection.
- Transmission Related Agreement (if applicable)
- Sets out the calculation for a project’s liability if restrictions on availability are not adhered to.
- For Generation: Security Statements (Appendix MM)
- Sets out the liability (cancellation charge) for the project (MM1) and associated security (MM2) in the next 6-month period, as well as listing the reinforcement works considered to be ‘attributable’ (MM3). These securities must be placed to NESO to progress to connection.
- For Demand: Security Statements (Appendix M)
- Sets out the liability and associated security over the next 6-month period based on the final sums methodology used for demand projects. This also includes an estimate of the liabilities and securities over the course of the project up until energisation.
A distribution connection offer is typically contained within a single document which sets out the connection details in several clauses. The structure of the offer varies between DNO, but the contents typically include:
- Key connection details
- Connection Charges
- Enabling Works
- Queue Management Milestones
While the exact contents and structure of a Gate 1 offer is unknown, it will contain an indicative connection date, indicative point of connection and a number of clauses to cover the transition between Gate 1 and Gate 2 following a later application window.
Updates in Gate 1/Gate 2 Offers
How will the gated connection offers differ from those previously issued by NESO?
- Key connection details, such as connection point, connection/reinforcement works, enabling works, constraints/curtailment, and connection date may change depending on the TO/DNO’s assessment of the Gate 2 application. Projects which were eligible for Protection Clause 1 or 2a may have had their connection point and connection date protected.
- The methodology used to calculate Queue Management (QM) Milestones for embedded projects was updated by the ENA and implemented by DNOs in October to better align with reformed connections process. The new methodology amends Milestone M4 to account for the new gated connection process at transmission level and replaces the previous tolerance method with a remedy notice which aligns closer with NESO’s methodology.
- Projects that do not meet the Gate 2 requirements will be transitioned to a Gate 1 Offer. In changing to a Gate 1 Offer, a project’s key connection details would become indicative and may be subject to change following a later application for Gate 2. The project’s connection offer would also no longer contain obligations such as QM milestones or securities and liabilities.
- Projects which receive a Gate 1 Offer with Reservation will have an additional clause added into their connection agreement to outline the conditions of the reservation. This will include reference to both a ‘Gate 2 Date’ and ‘Reservation Expiry Date’.
TNEI Top Tips
Below TNEI has provided our top tips for you to consider when reviewing your updated connection offer:
- Know where to look for key connection details which may have changed. For transmission offers this includes Connection Date and Point of Connection (OSD), Operational Restrictions (BCA Appendix D, if applicable), Technical Requirements (BCA Appendix F), Connection Asset Costs (BCA Appendix B), Securities and Liabilities (ConsAg Appendix M/MM), Construction Programme (ConsAg Appendix J), and QM milestones (ConsAg Appendix Q). Distribution offers will be laid out in a different format, which may vary depending on the DNO.
- Identify the expiry date and understand the process for accepting the offer.
- Ensure the project can meet any updated Queue Management milestones (particularly if the connection date has been changed). This includes the continued compliance of any QM milestones already met such as land rights or planning consent.
- Identify if any curtailment or constraints have been added/changed in the updated Gate 2 offer and consider the impact that this may have on the project’s ability to export or import.
- Ensure the required securities are consistent with the projects attributable liability as set out in the updated security statements.
- Assess the difference in financial exposure by remaining on the actual attributable liability profile compared to switching to the fixed attributable liability profile.
- Start reviewing your offer as early as possible. The process of clarifying and addressing any issues identified in the offer with NESO/the DNO can take time so it’s best not to leave it to the last minute.
How Can TNEI Assist?
TNEI has extensive experience in the grid connection process and an in-depth understanding of the content within a connection offer. Grid Connection support services that TNEI offer include:
- Techno-commercial Gate 1 and Gate 2 offer reviews, highlighting key risks, opportunities and next steps.
- Post-offer negotiations with the DNOs or NESO to resolve areas of concern identified within connection offers.
- Outage assessments to review the planned outages related to a connection and assess if the outages are likely to pose a material risk.
- A wider range of grid services including early feasibility studies, formal grid connection applications, due diligence, and ad-hoc guidance.
If you would like further support with your connection offers or future connection applications, please contact gridconnections@tneigroup.com.
[1] A BCA is a connection agreement held between NESO and a transmission connected project, a BEGA is a connection agreement held between NESO and a distribution connected project which requires transmission access, a BELLA is a connection agreement only available in Scotland between NESO and a distribution connected project.
