‘Phantom’ power projects are holding back the UK’s energy security – Centrica report

24 October 2023

Centrica

Media Relations

New report shows queue for new energy projects is blocked by developers that may not even have land rights and haven’t applied for planning consents
Estimated size of these power projects in the queue is 62GW, roughly one fifth of all power in the queue
Centrica CEO argues such ‘phantom’ projects should have Construction Agreements terminated if developers miss key milestones - and urges Ofgem to give National Grid ESO the power to remove projects from the existing grid queue

"In recent years energy security has rightly moved up the agenda as countries look to secure supplies and drive the transition to net zero. That’s why it defies belief that the queue for new, green energy connections is blocked by ‘phantom’ power projects. Not only do these ‘developers’ not have the money to develop, but many also don’t even have planning permission or land rights – they’re gambling that holding a space in the queue will make them rich."

Chris O'Shea, Centrica CEO

A new independent report, commissioned by Centrica, has revealed the extent of the power projects holding back the UK’s energy security and creating risk around hitting net zero.

The report examined the UK’s existing queue for Transmission Entry Capacity (TEC) – the queue for connecting new projects to the transmission grid – and discovered that it is up to four times oversubscribed. Not only that, but this oversubscription has become significantly worse in the last few years.

It found that:

There are currently 371GW of projects in the queue, enough to significantly improve the UK’s energy security.
Around 114GW worth of projects have listed their connection date as before 2029…
…but around 62GW of these projects are only in the scoping phase and developers may not even have secured land rights or applied for planning consent.

The report suggests that the oversubscribed queue, and longer wait for connections. has a damaging effect on the investments that could drive the UK’s energy transition and energy security.

Ofgem is exploring rule changes (CMP376) to address queue issues and is expected to decide these before 10 November. These rule changes would grant the ESO the ability to remove projects from the queue if they miss key milestones. Ofgem is currently considering whether to apply this rule change to just new projects entering the queue, or whether the rule change should also be applied to projects already in the queue.

When examining Ofgem’s solutions, the newly published report estimated that applying the rule change to projects already in the queue could add an additional 12GW of green power to the system in the short-term, as space is created for those projects that are ready to progress. This would be a beneficial result for consumers, net zero targets, and energy security, as moving stalled projects out of the way would allow more renewables onto the system quicker. It also noted this benefit would not materialise if Ofgem opts to only apply the rule change to future projects and keep these phantom power projects in the queue.

Chris O’Shea, Centrica Group Chief Executive, said:

“In recent years energy security has rightly moved up the agenda as countries look to secure supplies and drive the transition to net zero. That’s why it defies belief that the queue for new, green energy connections is blocked by ‘phantom’ power projects. Not only do these ‘developers’ not have the money to develop, but many also don’t even have planning permission or land rights – they’re gambling that holding a space in the queue will make them rich.

“The system was created for a different time, when a small number of large projects were connected each year. Our current approach is not fit for purpose and needs urgent reform.

“Thankfully Ofgem has now recognised the need for action but every day we wait for action is costing consumers money. Urgently introducing an industry rule change and applying it to the current queue, so that existing phantom projects lose their place when they miss milestones, would show that Ofgem were helping to reduce costs for consumers, to drive the energy transition and to improve the UK’s energy security.

NOTES

Notes to Editors

The full report from Charles River Associates can be viewed here: CRA Report on CMP 376
Ofgem is due to decide by 10 November 2023 on the industry code change ‘CMP 376: Inclusion of Queue Management process within the CUSC’.
The CUSC, or the Connection and Use of System Code is the contractual framework for connecting to and using the electricity transmission system. CMP 376 would require developers to meet a series of phased milestones – securing land rights, initiating, and securing planning consents, and agreeing a construction plan. If a project missed those milestones, it would either be removed from the queue, or for later milestones, the ESO would have the right to remove the project, but could exercise discretion, for example if in cases where a milestone was missed for reasons beyond the projects control.
The CMP 376 code change was proposed by the ESO in July 2021 and further developed in consultation with industry, before a Final Modification Report was presented to Ofgem.
The Final Modification Report gives Ofgem several options to choose from when approving the CMP 376 code change. Notably an option called WACM7, would ensure queue management milestones are applied to the existing queue.

About Centrica

Centrica is an international energy services and solutions company, founded on a 200-year heritage of serving customers in homes and businesses. We supply energy and services to over 10 million residential and business customers, mainly in the UK and Ireland, through brands such as British Gas, Bord Gáis Energy and Centrica Business Solutions. Through our trusted brands, we deliver innovative energy and services solutions to help solve customers’ needs, supported by around 7,000 engineers and technicians. We are committed to creating a cleaner and greener future.