The Energy Transition | NESO publishes final connections methodologies following Ofgem decision

This week we look at NESO's finalised connections methodologies to implement reform, revisions to National Policy Statements, Ofgem's new framework for local electricity networks and much more.

NESO confirms amendments to connections methodologies following Ofgem decision

Following Ofgem's approval of National Energy System Operator's (NESO) connections reform proposals, NESO has published final versions of the three methodologies (Gate 2 Criteria; Connections Network Design; and Project Designation). The three updated methodologies will be used to implement connections reform and they contain minor amendments in response to Ofgem's recommendations.

NESO has categorised the methodology changes as (i) Ofgem Decision and Recommendations Related Changes and (ii) Clarificatory and Typographical Changes (which mainly consist of spelling and formatting rectifications). The methodology changes to address Ofgem's recommendations fall into four broad areas:

• NESO has provided assurance that projects which are eligible for Protection Clause 2a under the Gate 2 Criteria methodology and have existing agreements to connect on or before 31 December 2027 will retain their connection dates and points. As with Protection Clause 1, these projects will be protected when NESO forms the new queue, meaning they will remain in Phase 1 and retain their existing relative queue position.
• NESO has simplified Protection Clause 3. This applies to projects that (i) submitted planning applications on or before 20 December 2024, (ii) do not receive an outcome by the closure of the CMP435 Gated Application Window and (iii) achieve consent after the closure of the CMP435 Gated Application Window. The CMP435 Gated Application Window is anticipated to open for distribution generation customers this month and will remain open until closure of the Gate 2 CMP435 application window for transmission projects. The earliest it will close is 22 July 2025. NESO will publish exact dates with at least four weeks' notice. If this results in a project not meeting the Gate 2 Strategic Alignment Criteria and the applicant chooses to reapply in a future CMP434 Gated Application Window, the project will be eligible to receive Gate 2 terms even if this would exceed both the zonal and GB permitted capacities for the relevant technology.
• NESO has removed references to "the Pause" (referring to its pause in accepting new applications for projects seeking to connect at transmission, implemented on January 29, while it implements connection reforms) in previous versions of the methodologies, as the process steps established by the CMP435 and CMP434 working groups (WACM1 and WACM7) are no longer applicable. The Existing Agreements Register will be added to the list of information to be published after the formation of the queue.
• Minor amendments related to the recent updates to the Clean Power 2030 Action Plan Annex regarding solar capacities, which was republished on 7 April.

NESO has also published an updated Readiness Declaration Template, which customers need to complete to evidence that their project is ready and eligible for a place in the new connections queue. NESO confirmed that more documents will follow over the next few weeks that aim to facilitate the implementation of the TM04+ reforms.

2025 revisions: Planning for new energy infrastructure

In July 2024, the government launched a review of the energy National Policy Statements (NPSs) to ensure they aligned with the government's Clean Power 2030 Action Plan. The NPSs were established under the Planning Act 2008, providing a legal framework and guidance for planning decisions in relation to the development and implementation of nationally significant infrastructure projects (NSIPs) to ensure they meet national objectives and regulatory standards.

Revised drafts of EN-1: Overarching National Policy Statement for energy; EN-3: National Policy Statement for renewable energy infrastructure; and EN-5: National Policy Statement for electricity networks infrastructure, have now been released. This marks a significant step towards strengthening the delivery of major new energy projects and establishing more effective and comprehensive planning policies which are also aligned with the Clean Power 2030 Action Plan. The government is inviting responses on the draft updates and participation from members of the public, industry, non-governmental organisations and any other organisations.

The consultation is open until 29 May 2025, after which the government will issue a formal response and make any necessary revisions to the draft NPSs. Once formally approved by Parliament, these energy NPSs will serve as the primary reference for the Secretary of State and the Planning Inspectorate when making decisions on applications for development consent for significant energy infrastructure projects.

Enquiries to: energyNPS@energysecurity.gov.uk

Respond online at: energygovuk.citizenspace.com/energy-security/nps-revisions-2025

Ofgem outlines amended regulatory framework for distribution network operators

In respect of the regulation of distribution network operators (DNOs), Ofgem has published its framework decision for the next price control period, known as "ED3" and commencing in April 2028.

The price control periods are an important part of Ofgem's regulation of DNOs, setting the level of allowed revenue they are permitted to earn over the length of that period with the aim of balancing the costs of critical network investment against delivering a fair price to consumers. The framework review process allows Ofgem to make amendments to the regime for the relevant period. This decision follows the ED3 Framework consultation, which closed in January of this year (and on which we have reported previously).

The ED3 period will be fundamental for the energy transition, covering the period from 2028 to 2033, which will not only include the government's plans for Clean Power 2030 (CP30), but also the ban on sales of new petrol and diesel cars from 2030, and high anticipated growth in power-intensive technology sectors such as artificial intelligence and data centres. Steve McMahon, Ofgem's Director for Network Price Controls, said: “The local electricity distribution grids are central to the government’s clean power mission and the wider transition to net zero, enabling the decarbonisation of heat, transport and industry."

Focusing on an evolution to a "more planned system at the regional level", and delivering network services which can support the transition through this pivotal period, the framework identifies four key areas:

Networks for net zero

Ofgem will require DNOs to prepare long term investment plans up to 2050. These plans will be framed in the context of the transitional Regional Energy Strategic Plans, due to be published by NESO in 2026.

DNOs should then optimise their shorter term ED3 plans to align with the long-term plans. Ofgem states that companies will be fully funded to achieve these aims, but held to account for delivery of the necessary infrastructure.

This builds on the National Infrastructure Commission's review into the distribution networks, which labelled the existing price controls system as too complex and focused on the short term costs of important investment.

Responsible and sustainable businesses

DNOs must minimise their environmental impact and deliver excellent customer service. There will also be a drive to ensure electric vehicle charge points, renewable generation, housing and industry can be connected to the local network quickly and efficiently.

Smarter networks

Enhancing the focus on digitalisation within the sector, DNOs will be required to enhance their data sharing and processing capabilities, and incentives will be provided to drive innovation in their planning and operational responsibilities.

ED3 will also retain the Distribution System Operator function, but will ensure it evolves to drive investment planning into the right areas and improve operational efficiencies.

Resilient networks

The framework recognises that increased electrification will lead to increased risks of disruption with wider ramifications across infrastructure sectors.

In response to this, DNOs will be required to ensure their approach to maintaining and replacing assets is sufficient to preserve reliability into the future. This will include enhancements to ensure that the network can withstand future risks, such as extreme weather and cyber-attacks.

Throughout the ED3 review process, Ofgem pledges to support DNOs in providing certainty for investment requirements (including at a supply chain level), and in developing innovations which can aid network services in rising to the challenge of a net zero power system, while maintaining the security and resilience of critical infrastructure.

Ofgem will now develop a more detailed methodology to build upon the published framework. DNOs will then be required to provide Ofgem with their spending plans in 2026, giving time for further development before the ED3 effective date of 1 April 2028.

Government introduces Heat Network Technical Assurance Scheme

The Department of Energy Security and Net Zero (DESNZ), working alongside its technical adviser Fairheat, has developed and published guidance on the Heat Network Technical Assurance Scheme (HNTAS).

This scheme is established under powers of the Energy Act 2023 and its main objective is to deliver low-carbon heat by ensuring that heat networks, ranging from communal systems to large-scale heating, meet minimum standards of efficiency, reliability and consumer protection.

The HNTAS aims to address issues in the UK's heat sector such as inconsistent technical quality and limited performance data by introducing mandatory technical standards and a robust certification process. DESNZ is creating a comprehensive framework that sets clear technical requirements and certification procedures to ensure compliance throughout the lifecycle of heat networks.

Operators of new and existing heat networks will each have to comply with HNTAS. The compliance process for HNTAS certification will be:

• For new heat networks: assessments must be passed at three critical stages: before design begins, before construction starts, and before operation commences. There will then be an additional assessment after two years of operation and ongoing monitoring of performance during the heat networks lifecycle.
• For existing heat networks: will undergo periodic assessments, benefiting from a transition period to install appropriate metering and meet more lenient initial performance thresholds, allowing time to achieve full compliance.

After obtaining an HNTAS certification, heat network operators must regularly submit data to demonstrate ongoing compliance with key performance indicators. Ofgem will be the scheme regulator and under new powers created by the Energy Act is responsible for awarding a licence to a technical standards Code Manager, who in turn is responsible for maintaining the technical code documents, which include detailed standards, assurance procedures and assessor qualifications.

The HNTAS is primarily based on the voluntary Chartered Institution of Building Services Engineers (CIBSE) CP1 Code of Practice (2020), made freely accessible through a partnership between CIBSE and DESNZ to encourage broad adoption and industry preparedness. The development of HNTAS has involved engagement with stakeholders including manufacturers, housing associations, local authorities and experts to ensure the scheme is practical, effective and aligned with industry capabilities.

The next steps include the development of a pilot programme from late 2024 to 2025. This will be followed by a public consultation on technical standards in the first half of 2025. Finally, the scheme’s official launch, marking the start of mandatory compliance and sustainability of heat networks across Great Britain, is planned for 2026.

Progress report published by the Climate Change Committee

Following its recent publication of its Seventh Carbon Budget, the Climate Change Committee (CCC) has released its first statutory progress report to Parliament. The report focuses on the National Adaptation Programme (NAP3) and builds on the CCC's initial independent assessment of the NAP3.

The report finds that the UK government is failing to prepare the UK for climate change and that its preparations are inadequate. It also concludes that the government is failing to address these inadequacies, despite an improved rhetoric. The report recommends four areas for improvement:

• Improved objectives and targets: making targets measurable while strengthening objectives in particular in relation to adaptation. The CCC proposes setting "clear overarching adaptation objectives in key areas".
• Improved coordination across government organisations. The CCC notes that some areas are managed by DEFRA, others by the Cabinet Office, and that adaptation and climate risks are not integrated properly across government departments.
• Integration of adaptation in all relevant policies to ensure that planning receives sufficient resources across government. The CCC notes that the next spending review will be key to ensuring that adequate funding is put towards meeting the government's climate resilience objectives.
• Implementation of improved monitoring, data collection, reporting and evaluation processes. The CCC suggests national-scale monitoring and a co-ordinated process for data collection across various sectors each year.

For energy infrastructure specifically, the report looks at the following outcomes and measures the UK government's progress against them. The outcomes are:

• Reducing vulnerability of energy assets to extreme weather.
• Climate resilient supply of energy.
• Identification and management of interdependencies.

These outcomes have been ranked in two categories: (1) against their delivery and implementation to date – the above three categories are ranked as limited progress, limited progress and partial progress respectively; and (2) against their upcoming policies and plans for achievement – where these categories are ranked as partial progress, limited progress and insufficient progress respectively.

Only one of these ratings has improved since 2023, with identification and management being upgraded slightly in respect of its delivery to date. 

The report does recognise that organisations are working to improve certain aspects of the energy sector deemed inadequate, such as NESO's resilience remit, but argues more needs to be done to improve the sector. 

This article was written with the assistance of Ellie Smyk, Imogen Drummond, Adam Budd, trainee solicitors, Sumaiya Hafiza, solicitor apprentice, and Tomi Agbonifo, paralegal.