Grid Capacity Race: Survival of the Fittest Explained

Hello, Champions of Net Zero!

As we strive towards a sustainable future, the transition of our energy systems is not just crucial; it is a pivotal aspect of the government’s Clean Power 30 initiative. This ambitious plan aims to bolster economic growth while simultaneously addressing the pressing need for renewable energy. However, as we push forward, we face a significant hurdle: a staggering 1,000 gigawatts of capacity are vying to connect to the grid, despite only 200 gigawatts being necessary to facilitate the energy transition. This has turned the race for grid connection into a high-stakes contest where only the most strategic and best-connected developers are likely to succeed.

For some time now, it has been evident that applications from developers to the UK’s electricity distribution and transmission networks are facing serious delays. Lengthy queues of projects are waiting for their turn to connect, with some estimates suggesting that these delays could stretch up to 10 to 15 years. Such protracted timelines introduce a cloud of uncertainty around final costs, exacerbated by significant fluctuations in capital costs, funding expenses, and wholesale energy prices. The implications of these delays are severe: they threaten the viability of numerous developments as investors reconsider projects that may not secure grid connections for years to come.

The National Energy System Operator (NESO) has acknowledged that the existing ‘first-in-the-queue, first-served’ policy, rooted in outdated processes, is a substantial obstacle. In response, NESO has initiated its Connections Reform process, inviting consultations and running working groups to explore solutions to this gridlock. However, many industry insiders express concern that the issue extends beyond mere queue positions; it also highlights a systemic advantage for large, well-funded companies that have a realistic chance of securing their place in line.

The current landscape has led the UK’s race to connect renewable energy projects to become a fierce competition dominated by the “fittest” players. These larger entities are leveraging their resources to accelerate planning approvals, secure supply chain agreements, and aggressively lobby government officials and regulators to tilt the scales in their favour. In stark contrast, smaller, independent developers, despite possessing strong technical expertise, find themselves at a disadvantage. Lacking the financial clout for sustained lobbying or the necessary resources, they risk seeing their shovel-ready projects overlooked in favour of industry giants. One developer even revealed that after investing millions into various projects, over half now teeter on the brink due to the bottleneck in grid connections.

The stakes are incredibly high. The UK requires an infusion of hundreds of billions in investment to realise the energy transition and fulfil its net-zero ambitions. However, should too many projects falter, the essential capital to fuel this transition may evaporate, with investors opting to redirect their funds elsewhere in Europe or beyond.

In this competitive environment, it is the developers with the deepest pockets and the strongest industry connections who stand to gain the most. Meanwhile, the future remains uncertain for others, their green energy aspirations at risk of being overshadowed by the industry’s behemoths.

But could adopting a more flexible approach to capacity help alleviate not only the inertia plaguing projects but also enhance opportunities for smaller developers? Under the current framework, once a connection offer is accepted, it is deemed contracted generation, even if the developer is not yet ready to produce electricity. NESO’s analysis indicates that only 30% to 40% of projects in the queue reach completion. This scenario stifles those developers who are more prepared to move forward, often the smaller, more agile players in the market.

Moreover, the geographical distribution of energy resources presents a challenge. Many resources are located where demand is minimal, and demand often exists in areas with scant resources. This mismatch necessitates long-distance power transmission, exacerbating the pressure to deliver new infrastructure. Transitioning to regional or zonal solutions would significantly benefit the Great Britain (GB) grid.

In addition to the geographical challenges, developers frequently encounter prohibitively high use of system charges due to outdated charging methodologies. This results in an environment that penalises investors attempting to establish renewable energy developments in areas where actual energy generation can occur.

The lack of transparent dynamic modelling further complicates the situation, leading to a grid system that is often over-engineered for the assets connected to it, while simultaneously limiting further connections based on a narrow band of potential peak generation that does not always reflect real-world scenarios. In essence, contracted generation does not consistently align with actual generation capabilities.

In light of these challenges, NESO is actively pursuing improvements in queue management, including initiatives such as Transmission Equivalent Capacity (TEC) amnesties that allow energy generators to terminate or reduce their TEC without incurring penalties. Additionally, better enforcement of connection agreement milestones is being implemented. The criteria set out by CP30 for renewables on a zonal basis promise to provide significant benefits. However, it is essential to recognise that while some developers will undoubtedly benefit, others may find themselves at a disadvantage, necessitating swift consideration of developments beyond 2030.

Nevertheless, an alternative flexible approach could yield substantial benefits for all developers, including smaller, more innovative companies. By awarding partial capacity to developers, projects could be fast-tracked, allowing additional capacity to be granted as the project evolves and as the grid infrastructure permits. This method could alleviate congestion in a saturated marketplace, in sharp contrast to the current rigid either/or approach that leaves many developers and investors in a state of uncertainty.

As we navigate these complex challenges in the energy sector, it is imperative that we advocate for strategies that not only facilitate the transition to a sustainable energy future but also ensure that all developers, regardless of their size, have a fair chance to contribute to our collective goals. The future of the UK’s energy landscape depends on a collaborative effort that empowers diverse voices and innovations, paving the way for a greener, more resilient tomorrow.

This insightful discourse originally appeared in the May 2025 issue of Energy Manager magazine. For more information and to stay updated on the latest developments in the energy sector, consider subscribing.