The Energy Transition | Ofgem approves code modification proposal for England and Wales grid reforms

This week we look at Ofgem's approval of Code Modification Proposal (CMP) 446, the completion of final stages in Parliament for the Great British Energy Bill and the government's boost to the Clean Industry Bonus funding.

Ofgem approves code modification to increase transmission impact assessment thresholds

Ofgem has approved the proposals in Connection and Use of System Code (CUSC) modification CMP446 to increase the threshold for its Transmission Impact Assessment (TIA). The CUSC modification raises the minimum capacity threshold for the TIA from 1 megawatt (MW) to 5 MW, meaning any project with an export capacity of less than 5MW would not be required to undergo a TIA prior to connecting to the distribution network.

By streamlining the connection process for smaller projects, CMP446 is expected to enable faster deployment of renewable energy and distributed resources. The modification takes effect ahead of the "Gate 2 to Whole Queue" process which forms a part of the wider reform of grid connections, that are expected this summer. The timing ensures that current projects with an export capacity of between 1MW and 5MW can benefit from the raised threshold and avoid unnecessary transmission reinforcements and delays.

Matt Vickers, director of connections reform at NESO, said: “This change to the connections process is an important step in supporting future community energy and smaller scale projects to connect to our electricity distribution networks. By raising this threshold, we can unlock the connections process for over 682MW of smaller projects without sacrificing on resilience of our electricity networks.”

Government to increase Clean Industry Bonus funding to £544m

The government has announced that the additional Contracts for Difference (CfD) revenue support provided under the Clean Industry Bonus initiative will be increased from £200 million to £544 million.

The Clean Industry Bonus is designed to incentivise offshore wind developers to invest in more sustainable supply chains by rewarding underprivileged regions or cleaner supply chains, including traditional oil and gas communities, ex-industrial areas, ports and coastal towns. The government hopes that this will encourage cleaner manufacturing, upgraded factories, port infrastructure and UK-based supply chains, as well as create highly skilled jobs such as engineers, electricians and welders.

Due to higher-than-expected demand for the funding, the government has boosted the budget, with hundreds of bids having already been received from the fixed and floating offshore-wind sector. The government states that the scheme aims to leverage up to £17 of private sector investment for every £1 spent, especially in deprived communities, with the goal of achieving up to £9.3 billion in private sector investment over the next four years.

The government’s support aims to leverage investment and significantly boost the UK's clean energy supply chain. The Clean Industry Bonus is part of a broader industrial strategy set to be unveiled this summer, which aims to expand UK port infrastructure and offshore wind manufacturing.

The UK Energy Secretary, Ed Miliband, emphasised the scheme's significance, stating it "creates jobs, drives growth, and transforms industrial towns and cities."

The application window for the initiative has closed, and the successful applicants will be announced after the budget is finalised this month.

Crown Estate to boost the UK energy transition with offshore wind expansion

The Crown Estate has confirmed that it will go ahead with its capacity increase programme. First announced in November 2023, the programme will permit an additional 4.7GW of energy to be developed on existing seabed lease agreements on Crown Estate property.

The additional capacity will be delivered through the expansion of seven fixed-bottom windfarms around England and Wales, all of which have existing grid connections and infrastructure. These are Awel y Mor, Dudgeon, Sheringham Shoal, North Falls; Five Estuaries, Rampion 2 and Dogger Bank D.

The news follows Orsted's decision to withdraw from the Hornsea 4 project and is hoped will boost investor confidence and the drive to CP30 as the CE continues to grant seabed rights to offshore wind projects.

National Wealth Fund commits £600m to finance package for Scotland-to-England interconnectors

On 8 May, the National Wealth Fund (NWF) announced it will provide £600 million to Iberdrola-owned ScottishPower to support UK electricity grid upgrades as part of a larger £1.35 billion financing package led by Bank of America as the sole debt arranger, and Lloyds Bank, NatWest, Bank of America, BankInter, BNP Paribas, Caixabank and Banco Sabadell as lenders.

The financing will support the delivery of seven of ScottishPower's transmission grid upgrade projects, including ScottishPower's development of the Eastern Green Link (EGL) projects 1 to 4, which seek to improve the UK's transmission between generation in Scotland and consumption in North East England and Norfolk. The Scottish-English border is the most constrained transmission boundary in the UK and the EGL projects seek to reduce congestion costs, lower consumer costs and efficiently redistribute renewable energy across the UK.

NWF's investment will also contribute to some ancillary infrastructure around the EGL projects including substation renovations and overhead cable works.

Beyond EGL projects 1-4, National Grid, as part of its "Great Grid Upgrade", has also opened a consultation on the EGL 5 "super highway". The project will involve laying a total of 555 km of subsea high-voltage direct current (HVDC) cabling between Scotland and Lincolnshire and requisite onshore infrastructure. The EGL 5 stage 1 consultation is open for feedback until Monday 23 June,. If progressed, it is expected that EGL 5 would transport enough power for up to two million homes in the Midlands and South England.

Great British Energy Bill receives Royal Assent

The Great British Energy Bill, which is the enabling legislation for the state-backed energy investment vehicle Great British Energy, received Royal Assent, the final stage to the legislative process in Parliament, on 14 May.

The government has established GB Energy with the aim of making Great Britain a "clean energy superpower" through various investments amounting to a total investment of £8.3 billion over the course this Parliament.

Jurgen Maier, chair of GB Energy, said the passage means: "we now have full backing to scale up the company, crowd in investment, and back clean energy projects across the country".

This article was written with the assistance of Ellie Smyk and Adam Budd, trainee solicitors; Tomi Agbonifo, Paralegal; and Sumaiya Hafiza, Solicitor Apprentice.