Energy Supply

CHANGES IN ELECTRICITY CONNECTION COSTS – ACCELERATING NET ZERO

Carolina Escudero, Senior Project Manager, Power Systems, Ramboll

The UK’s current path to netzero has seen an increased reliance on the electricity system. Projects regarding electrification of heat, powerto-x and electric mobility require large electricity connections to the distribution network to support their processes. Compounded with the needs of other energy intensive industries such as data centres, the electricity distribution grid is under increasing strain. To facilitate the additional capacity needed on the system, significant investment is required on the distribution network.

Although Distribution Network Operators (DNOs) have invested in innovative solutions to these challenges (e.g., flexible connections and active network management), in certain cases a traditional approach is needed, and new capacity needs to be built. Depending on where and how much additional power supply is required, new connections can take anywhere from 8-18 months to potentially 5-10 years where transmission reinforcement is required. Not only are these lengthy timescales on the critical path for decarbonisation projects, but they often come at a high cost.

The cost of a new connection is usually paid for by the customer who is requesting the connection. This customer can be housing developers, data centre owners, district energy developers among others. To obtain the full picture of how much a new connection will cost, the customer requires information from the DNO regarding two key components: non-contestable and contestable works. Non-contestable works can only be done by the DNO as they require specialist skills or relate to work on their existing network. They are primarily composed of the following elements: connection to the network, reinforcement costs and the Electricity Connection Charges Regulation (ECCR). Meanwhile, contestable works relate to all the assets and labour needed from the point of connection to where the new project will be located.

If there is not enough available capacity on the network in the area where the project will be located, the DNO will need to invest in upgrades to create the necessary additional capacity for the customer. In this case, the customer will be liable for either whole or partial costs of the works required to create this capacity. These are called reinforcement costs. Once the non-contestable offer is received, customers may find they are faced with substantial costs to connect (think millions) due to either reinforcement costs or ECCR costs. This “knownunknown” can make or break the project’s electrification business case.

In May 2022, a significant change to these cost arrangements came into force that could save millions of pounds of development budget for electrification customers and potentially accelerate the green transition. So, what has changed, and what does it mean for your electrification project?

WHAT HAS CHANGED?

In November 2017, Ofgem (the electricity regulator) started reviewing the current connection application process, costs allocation, and assessing if the charging methodologies were fit for purpose for a low-carbon future. In May 2022, Ofgem concluded that the current charging arrangements could hinder the roll-out of electrically-based low carbon technologies. As a result, Ofgem has instructed DNOs to change the way new connections are charged. The proposed changes are planned to be implemented in April 20231 .

The main impact of the changes is that instead of a reactive approach, whereby DNOs wait for customers to trigger and pay the reinforcement, the network should be reinforced proactively to create capacity ahead of need. Therefore, reinforcement will not be paid for by the customer connecting to the network.

There will be a difference in approach for large electricity connections as well as generation connections. However, if a demand customer (e.g., housing or district heating developer) requests a connection, the following will change:

• Applications before April 2023: Customer connection offer will include reinforcement costs

• Applications after April 2023: Customer connection offer will not include reinforcement costs (except if a highcost cap is exceeded)

This means that for most demand projects reinforcement costs that previously could hinder the project’s business case, will not be included in the connection offer from April 2023 onwards.

This change comes as a significant step in ensuring the low carbon transition can be achieved in a costeffective manner. It will remove a key risk to customers’ and projects’ business cases as well as enabling projects that would otherwise not be feasible due to the high non-contestable cost element. Moreover, the change also enables the DNO to proactively invest in the network to create capacity, instead of waiting for a connection customer to pay for this capacity. This move is expected to result in more capacity being available in the near-future and shortening the time to connect a project. It is hoped that the changes in connection costs will both allow customers to reap the financial savings, and also provide much-needed rocket boosters to the net-zero transition.

For more information, please see links below to the Ofgem website: https://www.ofgem.gov.uk/cy/ publications/access-and-forwardlooking-charges-significant-codereview-decision-and-direction

THE PROJECTED SCALE OF POWER GRID EXPANSION IS BOTH UNSUSTAINABLE AND UNNECESSARY

Amir Cohen, Founder & CEO of EGM

The current energy security and climate crisis is creating limitless demand for new power grid infrastructure and a rising risk of gridlock. Electricity grids will need to dramatically increase capacity to fulfil growing demand for everything from electric cars to heating systems and incorporate more renewable power amidst a growing energy security and climate change crisis. Yet the enormous grid expansion that is projected could add unsustainable costs to taxpayers and consumers at a time of soaring inflation, and cause disruption to local ecosystems and communities. And few realise that much of the demand for new grid capacity is being driven by wasteful and inefficient usage of existing infrastructure.

Outdated methods of monitoring network conditions and capacity means that global networks are suffering major power losses and running significantly below their true capacity, creating needless congestion and constraints on renewable generation. Cumulatively, this is hampering the electrification of the economy and decarbonisation of power and driving excessive and unsustainable demand for new infrastructure.

THE CAPACITY CRUNCH

A looming power grid capacity crunch is impeding the transition to more secure, affordable, and clean energy. Record amounts of future renewable capacity is caught in interconnection queues while capacity constraints are forcing grid operators to curtail supply from existing renewable generators. This not only hampers the energy transition but creates a growing risk that soaring demand from electric cars and heating could cause power shortages and outages.

Some reports estimate that the energy transition would require a century of electric grid infrastructure development in just a decade. Even excluding net zero targets, some analysts project that future generation and demand would need at least $14 trillion worth of new transmission and distribution infrastructure by 2050. And global grid expansion is already far behind target due to spiralling supply chain costs, cumbersome permitting processes and land-use conflicts with local communities and environmental groups. The speed and scale of infrastructure envisaged is already facing major resistance due to the potential impact on everything from flora and fauna to water pollution.

BLIND SPOTS ON THE NETWORK

Widespread network inefficiencies are wasting enormous amounts of existing renewable power and network capacity that could avert the need for excessive new infrastructure construction. Many utilities have very limited oversight of primary circuits using basic Supervisory Control and Data Acquisition (SCADA) systems, and little to no visibility of the secondary circuits beyond their substations. Operators currently rely on rough estimates of network conditions or capacity from a few narrow parameters such as weather conditions or faults, leaving major data blind spots across their networks. This denies them the opportunity to help reduce power loss by pinpointing and preventing electricity losses or seeing where they could share loads between lines. Crucially, limited data prevents them taking advantage of favourable weather to increase power flows without exceeding safe conductor temperatures.

For example, grid operators currently rely on inaccurate, crude calculations based on limited parameters such as windspeed to estimate the ampacity or maximum current that overhead power lines can carry without overheating. This means they are often setting excessively cautious capacity limits and curtailments that fail to take account of the greater thermal capacity of lines during cooler conditions. As a result, many power grids are running at 20% below their true capacity. Under-estimating ampacity also leads to renewable generators being needlessly curtailed and replaced with dirty power sources to lighten the loads on long-distance transmission lines during periods of peak demand. Resolving this would therefore help operators achieve electricity decarbonisation targets and increase capacity with existing infrastructure.

The lack of network visibility also means utilities are missing other opportunities to maximise efficiency and output without new infrastructure. For example, the lack of current, comprehensive data on loads across feeder lines is hampering operators from balancing loads between parallel lines to enhance grid reliability and flexibility. And outdated grid monitoring systems relying on limited, late information

from call centres or technicians mean that power loss and theft is going undetected across many networks.

A PIONEERING NEW APPROACH

Some pioneering utilities are now harnessing ‘multi-sensing’ technologies that accurately analyse multiple parameters in real-time to minimise power losses, optimise usage and maximise grid capacity. This could help operators enhance grid performance while deferring or reducing capital investment in new infrastructure.

A recent pilot saw the world’s first deployment of multi-sensing systems on transmission lines to enable Dynamic Line Rating, which safely increases power flows without exceeding safe temperature limits during cooler weather conditions. The Meta-Alert™ Grid Operation and Management System was operational within minutes of installation and is analysing data on over 60 parameters from voltage to temperature, helping accurately predict the maximum current that overhead lines can carry several days ahead. This will help operators harness favourable weather conditions to safely increase capacity, relieve congestion, and integrate more renewable power into networks without unnecessary extra infrastructure. By unlocking spare capacity on longdistance high-voltage transmission lines, this could also remove the need to curtail distant renewable energy generators during peak periods.

The same technology can also use feeder or meter sensors to identify low power levels or leaking grid components and even find common causes of power loss across multiple sites, helping networks conserve power. This could ultimately be combined with machine learning systems to create smart ‘self-healing grids’ that can anticipate and avert power loss or other faults before they occur.

The technology can also accurately analyse load measurements from each section of feeder lines to help operators find opportunities to balance loads between parallel power lines, increasing the combined capacity of the network. The system can offer load balancing recommendations and even model new load conditions to find the optimal ways of maximising capacity using existing lines. It has additional applications from predictive maintenance to balancing renewable supply and demand in real-time and even improving grid resilience against extreme weather.

Cumulatively, this could drive a sea-change in network capacity with power grids using comprehensive, current data on everything from voltage to temperatures to dynamically boost capacity and reduce power loss across networks. This could create smart, versatile networks that continuously increase flexibility and capacity, helping integrate more renewable energy without excessive new infrastructure. With grids rapidly approaching gridlock and construction lagging far behind targets, increasing network efficiency represents the most economically and environmentally sustainable path to boosting global capacity. https://egm.net/global