Do you want to get a new connection to the electricity network, or boost an existing connection? You may like to hold back on that until April, because after then the capital charge for the connection will fall away.
At the moment, businesses are charged the full cost of new or increased grid connections, whether that is to allow for export of power (such as from rooftop solar panels) or import (such as to install electric vehicle chargers). If there is spare capacity the cost of making the connection may be relatively low. But if your timing is unlucky, yours may be the connection that tips capacity over the local network’s limits, which could mean a suite of upgrades are made to the local and regional network - or even a reinforcement on connections to the transmission network. That cost all falls on the party that hits the trigger. Imagine if taking on a new distribution route left you on the hook for an upgrade to (for example) all the junctions you use on the A14.
This system in which the cost of upgrades falls on the unlucky party that triggers them has been in the regulator’s sights. Ofgem, the regulator, says the contribution to reinforcement means some connecting parties face prohibitive costs. It means the next companies connecting can ‘free ride’ on the party who is willing to trigger reinforcement. And it means that instead of considering the network holistically to find the most efficient way to providing new capacity for new connections, distribution networks react to connection requests.
It can also make connection bottlenecks worse: in some areas there is a ‘queue’ of customers waiting for connections and networks are required to follow a ‘first come first served’ rule. But who will take the final investment decision if they may be landed with funding an upgrade for the rest of the queue?
After a review Ofgem decided in May this year, that from April 2023 the cost allocation should change. Now its decision has come into force through changed rules for the connections code. So from April next year, businesses that are connecting new generation solutions – whether that is PV, a wind turbine or other assets such as gas or diesel engines – will pay only the local costs of connecting, while companies who want to take more power from the network (say for EV charging) will not pay at all (except for their own connection).
Reinforcement will still be required – but that will now be spread across all customer bills as part of the network charge. The shift is considerable. Ofgem will allow the networks to add over £400 million to their combined bills over the next two years – a cost that would otherwise have fallen unevenly on those wishing to connect. The regulator thinks it is worth it, because it will allow badly needed new facilities to connect. For businesses that have development in mind, the message is start planning now and get your place in the queue, but wait until April before you commit.
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