From April 2023, Ofgem plan to introduce changes to the way connection charges are levied. If you want to install an on-site solar array, some EV charge points, or even some heavy machinery which uses a lot of electricity, you might need to increase the size of your grid connection. Currently, the rules are that you pay the Distribution Network Operator (DNO) for the cost of your connection, plus a contribution to any reinforcement of the surrounding distribution network deemed necessary.
This can be very expensive and needs to be paid up front, so is quite often a key ‘blocker’ of businesses investing in low carbon technologies – the precise opposite of what we need if we want more decentralised renewable generation, low carbon heating and electric vehicles.
However, as part of their Network Access and Forward-Looking Charges reforms (NAFLC), Ofgem are looking to make it easier and cheaper. They plan on doing this by making the connection boundary ‘shallower,’ meaning businesses are not liable to pay for as much of any network reinforcement their connection necessitates.
In most cases, those installing or upgrading connections for assets which import electricity for use (EV charge points, heat pumps, industrial use) will now only have to pay for the cost of their connection.
Those installing or upgrading connections to be used by generation or storage equipment will disappointingly still be required to pay some reinforcement on top of the cost of their connection. However, it will be less than it was before, hopefully making it easier to build more renewable generation.
There will remain a ‘High-Cost Cap,’ which is a threshold to cater for connections which trigger exceptionally high reinforcement costs. However, this is likely to impact roughly 5% of cases.
As more and more transport and heat demand is catered for by electricity as opposed to liquid fuels and gas, distribution network management will become increasingly important. To accelerate this, Ofgem have proposed new options for some users on the distribution network regarding their ‘access rights,’ which define the extent to which they are entitled to utilise the network.
This may mean that in return for being connected quickly, businesses may agree to have their access to the network limited. There are several ways access can be defined, which could provide a greater degree of flexibility to the way the network is managed.
As part of their grid connection agreement, a user could agree that their DNO could restrict their access up to a certain level, up to an agreed percentage of time. In return, the DNO might be able to offer the user a connection where they might otherwise have had to refuse. .
Another option considered was time-profiled access, where users can agree that their access to the network will be limited at certain times of day, or that it may vary seasonally. This could allow better management of networks at peak periods. Despite considering time-profiled access choices a valuable tool, Ofgem have elected not to define the choices available to users, considering it is a matter best resolved between them and their DNO.
One category of access not investigated by Ofgem during this round of reform is ‘financially firm’ access. Currently enjoyed by many connected to the larger transmission network, when a generator with financially firm access is curtailed, they are compensated for the lost opportunity to export and sell their power. Given that many of the reforms tabled attempt to level the playing field between transmission and distribution connected users, we consider that for Ofgem not to explore this further is a missed opportunity.
Transmission charging for small generators
Ofgem’s prior proposals to extend Transmission charges to Small Distributed Generation (SDG) have been postponed, pending their upcoming wider review of the Transmission charging regime.
Good Energy opposed the original proposal, as it would have would have resulted in reduced revenues for many smaller renewable generators. This announcement is a positive development, however, Ofgem continue to believe that these charges should eventually be levied against SDG, and so there remains a degree of uncertainty for both existing and prospective generators.