The approach to securing a grid connection for generation projects has changed, with the traditional building block approach replaced with a multi-gate qualification criteria being established. In this article Rick Campbell looks at the next steps for the industry.
After months of wrangling – getting applications submitted, confirming land agreements, finalising documents and grappling with portals, we’ve finally reached the end of the Gate 2 submission window.
Our industry has never seen a situation like it, where projects en masse have faced an externally appointed deadline to decide whether or not they are a “goer”. It also represents the biggest collection of live project information in our industry, ever. (As an aside, I wonder if any industry has collated a comparable dataset.)
There will be, of course, some companies who submit applications and get what they hoped for. Well done to them.
For the others I believe the following outcomes are most likely:
1. Good projects will be left behind
Through some fault of timing or capacity, projects which would otherwise be viable will not have been submitted or fail to achieve a Gate 2 (Phase 1 or 2).
2. Some people will win too much
The lack of a crystal ball means that developers cannot predict what they will win – so cannot confirm to investors what grid liabilities they will be on the hook for. This is bound to cause problems and one of those will be companies having bitten off more than they can reasonably chew.
So – what happens next?
Projects that have not made the grade (or were not submitted) still retain a value. The development pathway and timescales change but a good project is fundamentally a good project.
Likewise, projects that achieve a Gate 2 offer now present the best opportunity for delivering new generation. (Note: we should not fall into the trap of thinking Gate 2 offers are equivalent to FID. They are not, and projects will continue to be subject to the trials, tribulations and idiosyncrasies they always have.)
Blackhall & Powis are fortunate to represent and work alongside a large portion of the developer community, and our clients and their projects will no doubt fall into all three categories above.
Our position provides a degree of insight into developer order books, and our role as a trusted supplier means that we are well placed to steer clients towards prospects, either as an investor or where they are looking to secure additional or alternative support for a project.
If you’d like a chat about where your portfolio sits following the Gate 2 process, please do reach out. We’d love to talk.
Get in touch at info@blackhallpowis.com
The big news in our industry this week was the final chapter in the zonal pricing debate.
Our director of Business Development, Rick Campbell, outlines B&P’s position.
It’s such a relief to see the back of zonal pricing.
The UK renewables market is going through a number of changes at the moment. Inevitably change brings uncertainty and challenges the investment case.
As a land, planning and development consultancy specialising in supporting project promoters in the renewables space – in particular with our work in new site origination – Blackhall & Powis have excellent insight into the appetite for new investment in the market at a macro level.
We’ve seen a level of caution applied to projects, most notably for clients at the more risk-averse end of the market.
Grid Connection Reform
There is a general acceptance that the “first come, first served” approach to grid connections is outmoded and does not take account of the varying complexity of project consents and land agreements for different technology types.
Connections Reform (TMO4+) and Clean Power 2030 (CP30) will deliver a “first ready, first connected” model which will focus on requisite land, planning, energy density and strategic requirement. This is a welcome change which will give meaningful, sensible connection deadlines for projects.
The changes are imperfect. In particular I believe the geographic capacity targets applied by CP30 do not align with permitting challenges, and this will be borne out by the results of the Gate 2 process later this year.
However, the direction of travel from these changes is both necessary and will improve the investment case for projects. There is general acceptance that the resultant model will be an improvement following these changes.
Zonal Pricing
I don’t claim to be an expert on electricity market structure, and for that reason have felt a little helpless on this subject.
Zonal pricing was designed to address the imbalance in energy costs from a consumer perspective. From a project developer perspective – gained from discussions across the industry – the effect would have been a hammer blow to the business case. Massive depletion in renewable project development. Huge reduction in one of the country’s leading industries.
As one industry veteran put it to me, we’ve waited for years for a replacement to TNUoS and managed to find something worse.
As a consultant supporting a large number of developments, unashamedly reliant on continuing investment in the market, I’m delighted it has been put to bed and we can focus on the business of supporting the next wave of renewable energy projects.