Off the grid: challenges of securing power (electricity) to sites

Connectivity challenges have left roughly 400 gigawatts worth of power projects currently queuing to be connected to the UK’s power grids and a vast number face a wait of up to 10 to 15 years. Though among these are speculative applications and so called “zombie sites”, there are a number of viable projects and developments being held in limbo as a result of estimated connection dates adding huge burdens to construction timelines. While reforms are underway to promote investment in the UK’s electricity infrastructure and the way connection applications are handled, there seems to be little prospect of a significant shift in the availability of power in the short term.

Issues with power supply in the UK partly arise from an increasingly ageing infrastructure, for example most transmission lines dating back to the 1960s. Traditionally, infrastructure was installed considering areas which were once subject to high industrial demands. However, our electricity needs are now much more disparate and, particularly in the context of our net zero targets, increasingly require the reconfiguration of infrastructure to accommodate connections to sustainable and renewable technology. Indeed, recent press coverage attests to concerns over the UK meeting its net zero targets unless its infrastructure can be quickly upgraded to deal with grid connection problems. 

Dubbed a “capacity crisis”, these issues are widespread but are particularly concentrated in certain areas of the country. The lack of power in west London in particular has been well publicised, with the great boom in data centres along the M4 corridor directly impacting the connections available for residential housing developments in the area. These factors result in projects facing significant delays and run the risk of land being overvalued in the absence of knowledge that there will be electricity network capacity constraints. 

Taking this into account, well advised developers will be aware that connectivity issues ought to be right at the top of the list of up front due diligence on any potential development sites. Some key ways to mitigate the difficulties associated with capacity issues include:

• Carefully assessing utility connection requirements for a project’s area, paying close attention to the logistics of and potential uses for a site.
• Engaging appropriate technical advisers to establish the constraints presented by existing utility infrastructure and provide cost and timing estimates for works required, such as diversions and new connections.
• Considering the existing requirements of surrounding sites, together with upcoming projects in the area.
• Making capacity and budget cost applications to the host distribution network operator (DNO) or considering whether power can be better or more easily procured from an alternative provider to the DNO (eg an independent distribution network operator (IDNO), which can provide electricity to any nationwide location and currently procure 80 per cent of new electrical connections in Great Britain).

Given the challenges identified in connection with power, our experience is that early engagement with experienced energy consultants is an early step to be taken in planning any significant development project. By working closely with energy consultants, developers can flush out potential connectivity issues and manage any difficulties that might otherwise adversely impact the long term viability of a project.

On a brighter note, there is some cause for optimism as UK plc appears to understand both the significance and the urgency of the situation. Last November saw Ofgem announce, among other reforms, an upheaval in the way in which the “connections queue” is to be managed. Historically, applications for connections to the grid were granted on a first come first served basis, which meant many developments got stuck behind lagging, or ultimately non-viable, projects. However, these latest reforms should help ensure that “zombie” projects can be actively managed, and, in some cases, terminated where they do not meet the necessary contractual milestones. It is hoped that this will considerably free up capacity for viable projects which otherwise fall further down the queue.

In addition, the Government has consulted widely on the power issues faced by the industry and it is alive to the challenges faced by developers. Time will tell how effective any changes will be, but it is a start. For now, however, developers need to remain vigilant and well prepared to ensure that they do not allow connectivity issues to blight their development plans.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2024