Source · Select Committees · Welsh Affairs Committee
Recommendation 10
10
Accepted
Paragraph: 73
We are encouraged that Ofgem is reviewing connection arrangements and we look forward to hearing...
Conclusion
We are encouraged that Ofgem is reviewing connection arrangements and we look forward to hearing more about the progress being made in the run up to 1 April 2023. We consider that due to the tight timeframes set by government net zero targets, urgent work should be done to overcome prohibitive upfront costs and the ‘chicken and egg’ situation by incentivising developers to share grid connection and reinforcement costs.
Government Response Summary
The government describes existing mechanisms to address upfront costs and incentivise developers to share grid connection and reinforcement costs, including Ofgem's decision to socialise a further proportion of network reinforcement costs and existing legislation allowing developers to share costs and receive reimbursement from second comers.
Paragraph Reference:
73
Government Response
Accepted
HM Government
Accepted
As the Committee notes, from April 2023, Ofgem, has decided to socialise a further proportion of network reinforcement costs for distribution network connection customers. This will reduce the upfront cost. Part of the rationale for this change was to address the ‘chicken and egg’ issue referred to by the Committee. BEIS has amended existing connections legislation to enable implementation of these reforms. This will give DNOs time to prepare for the changes and ensure they are implemented in a consistent manner across the country. Under the current connection framework, developers can already share the costs of connecting to the distribution network, for example by forming consortia. DNOs have a role to play in this by providing information on developers in an area who are interested in sharing connection costs. Additionally, where a first connection customer has funded network assets which are later used by subsequent connection customers (‘second comers’), under Government legislation the first connection customer may be eligible for proportionate reimbursement from the second comer(s). Ofgem has also set out in its Final Determinations for the RIIO-ED2 electricity distribution price control a decision to implement a new Major Connections incentive. This incentive will encourage DNOs to provide a high level of service to their major connection customers or face a financial penalty. The Energy Networks Association has recently established a Strategic Connections Group to look at what further improvements can be made, and BEIS is committed to working with Ofgem to explore any additional measures that could further accelerate connections, for example reviewing the minimum level of service or “guaranteed standards” a customer can expect from a DNO.