Connections Reform: delivery update and battery capacity
Summary
DESNZ and Ofgem signal they may intervene to remove battery storage projects from the reformed connection queue, where 14.8 GW above the Clean Power 2030 Action Plan range and 61.7 GW above projected 2035 system need have progressed to Gate 2. The surplus was caused by protection measures for projects with planning consent or Capacity Market agreements, which batteries secured faster than other technologies. NESO's annual consultation proposes disapplying protections so that only batteries with revenue support schemes qualify for future windows, and a code modification imposing financial attrition measures has been granted urgency.
Why it matters
This is the connection queue's free-option problem made visible: protection measures gave well-advanced projects costless queue positions, and batteries — which secure planning consent fastest — hoarded them. The letter stops short of administrative removal but the direction is clear: batteries without subsidy contracts face ejection from future gates, and the urgency-granted code modification will impose a financial cost on holding queue positions. Merchant storage developers who assumed queue access was secure now face a material change in the rules mid-process.
Key facts
- •221 GW of projects moved out of the main queue as not needed for 2035 or no longer progressing
- •14.8 GW of battery storage above the top of the Action Plan 2030 capacity range in Gate 2
- •61.7 GW of battery storage above projected 2035 system need
- •Clean Power 2030 Action Plan target: 23-27 GW of grid-scale batteries by 2030
- •8-20 GW of additional battery projects currently in Gate 1 could qualify for Gate 2
- •NESO consultation proposes disapplying protections under clauses 3a and 3b for batteries without revenue support
- •A code modification imposing financial attrition measures has been granted urgency
- •Programme has faced significant delays due to data errors in historic connection agreements
- •Some Gate 1 battery projects may secure LDES Cap and Floor agreements
Areas affected
Related programmes
Memo
What this is about
DESNZ and Ofgem have published a joint open letter acknowledging that connections reform has produced a battery storage surplus in the Gate 2 queue — 14.8 GW above the Clean Power 2030 Action Plan range and 61.7 GW above projected 2035 system need. The letter stops short of directing administrative removal but signals clearly that batteries without revenue support contracts face ejection from future connection windows, and that a code modification imposing financial attrition measures has been granted urgency.
This is the connection queue's free-option problem in its purest form. Protection measures gave well-advanced projects costless queue positions. Batteries — which secure planning consent faster than any other technology — hoarded them. The letter is the first joint ministerial-regulatory acknowledgement that the protections designed to maintain "investability" have instead created a speculative surplus that now threatens the queue's credibility and risks driving unnecessary network expenditure.
Key points
The surplus is structural, not incidental. The 14.8 GW overshoot against 2030 ranges and 61.7 GW against 2035 need did not arise from modelling error. It arose from protection clauses (3a and 3b in NESO's connection methodologies) that shielded projects with planning consent or Capacity Market agreements. Batteries meet these criteria faster than wind or solar because their planning applications are simpler and smaller. The protections were technology-neutral on paper but technology-selective in effect.
The queue formation exercise has already removed 221 GW of projects that were not needed for 2035 or had stopped progressing. Many more self-selected into Gate 1. Despite this, the battery surplus persists because the protection measures overrode the filtering logic. The reforms cleaned the queue of dead projects but could not touch live ones holding costless options.
Three mechanisms are now in play to reduce the surplus:
1. Voluntary attrition. The letter "encourages" developers to review their business cases and respond to offers promptly. This is the polite version. Merchant battery projects without contracted revenue — no CfD, no Capacity Market agreement, no LDES Cap and Floor — face a commercial decision: accept a connection offer that may come with reinforcement costs, or withdraw.
2. Financial attrition via code modification. An industry-proposed code modification imposing a financial cost on holding a queue position has been granted urgency. The letter does not name the modification or specify the mechanism, but the intent is to convert the free option into a priced one. If the fee is set high enough, speculative positions become expensive to hold.
3. Disapplication of protections for future windows. NESO's annual consultation proposes removing clauses 3a and 3b for battery projects, so that only batteries with a revenue support scheme (Capacity Market, LDES Cap and Floor) would qualify for Gate 2 in the next window. Without this change, an additional 8–20 GW of Gate 1 batteries could qualify for Gate 2, compounding the surplus.
The timing pressure is real. The letter is explicit that non-viable projects must leave before network companies commit capital expenditure on connections and reinforcement. Late withdrawal means abortive network design, knock-on delays for other projects, and costs passed to bill-payers. This is the Bastiat problem: the seen cost is the battery developer's sunk investment; the unseen cost is the network redesign and the projects behind it in the queue that get delayed.
Network companies are told to be pragmatic. The letter instructs network companies to reflect the surplus and likely attrition in their build programmes and funding commitments — i.e., do not start reinforcement work for connections that may never materialise. This is sensible but creates its own problem: if network companies delay build, projects that do proceed face longer connection timescales.
LDES Cap and Floor complicates the picture. Some Gate 1 battery projects may secure Long Duration Energy Storage agreements, which would make them priorities for 2030 connection. The letter acknowledges this but does not resolve the tension: batteries are simultaneously too numerous in Gate 2 and potentially too scarce if LDES policy succeeds.
What happens next
NESO's annual consultation on connection methodologies is the immediate vehicle. Stakeholders can respond on whether protections should be disapplied for batteries and whether further steps are needed. The consultation outcome will determine whether the 8–20 GW of Gate 1 batteries can enter Gate 2 in the next window.
The urgency code modification will proceed on an accelerated timetable. The financial attrition mechanism needs to be designed, consulted on, and implemented before the next connection window opens — otherwise the surplus grows.
Gate 2 offers are being issued now. Developers receiving offers must decide whether to accept, and network companies must decide how aggressively to programme reinforcement work. Both decisions are being made under uncertainty about how many projects will withdraw.
The policy direction is set. Batteries without subsidy contracts are being told, as clearly as a joint ministerial-regulatory letter can say it without using the words, that their queue positions are no longer secure. Merchant storage developers who assumed reform would protect their positions now face a material change in the rules mid-process. The free option is being priced.
Source text
This is an open letter from Michael Shanks MP , Minister for Energy in the Department for Energy Security and Net Zero, and Akshay Kaul, Director General for Infrastructure at Ofgem. The letter sets out progress in delivering connections reform, acknowledges ongoing risks to delivery, and explains the actions being taken to mitigate these risks. It highlights the outcomes of the recent queue outcome exercise, including the high volume of battery storage projects progressing to Gate 2 relative to the capacity ranges set out in the Clean Power 2030 Action Plan. The letter outlines ongoing work to assess the impacts of this relative surplus and reiterates the shared objective of ensuring the reforms minimise consumer costs and support the timely issuance of high‑quality connection offers in support of the government’s clean power and growth missions. It also notes that options are being considered to safeguard these objectives should further risks be identified, references NESO ’s annual consultation on its connections methodologies, and invites views from industry on whether additional steps should be taken through this process to address the battery surplus. Dear colleagues, Thank you for your continued engagement as we progress connections reform. Connections reform is a critical enabler for our clean power by 2030 ambition which is expected to bring forward £200 billion of investment in network and project build by 2030. Under the new process, 221 gigawatts ( GW ) of projects that applied for firm connection agreements but were not needed for 2035, or were no longer progressing, have been moved out of the main queue. Alongside this, many projects self-selected into Gate 1, meaning the total capacity filtered out is even higher. This has created a clearer and more credible pipeline for clean power delivery. Current queue outcomes indicate that most technologies have sufficient capacity in the prioritised (Gate 2 / Phase 1) queue to meet 2030 ranges. The programme has, however, faced significant delays due to data errors in historic connection agreements, and the need for NESO and network companies to rework network studies and planning. We have been clear that further slippage is not acceptable and have set expectations for a firm, coordinated response. This includes regular public reporting against the revised timetable so industry can track progress. We continue to work closely with NESO and the network companies to oversee delivery, using refreshed and enhanced governance. At this pivotal stage in the reform process, as projects begin receiving connection offers, proactive and timely communication between network companies, NESO and developers is essential to identify and escalate any issues. The queue formation outcomes also highlight emerging risks for certain technologies, in particular, a high volume of battery storage projects advancing to Gate 2 relative to the capacity ranges set out in the Clean Power 2030 Action Plan. The government and Ofgem strongly support the deployment of electricity storage, which plays a crucial role in allowing the clean, low-cost energy generated by renewables to be used more efficiently over time, thereby reducing the reliance of the power system on unabated gas. We remain committed, as set out in the 2025 Clean Flexibility Roadmap, to maintaining a market environment that supports the deployment of 23-27 GW of grid-scale batteries by 2030, and welcome the sector’s work to bring forward so many mature projects. Although the reform process removed many non‑viable battery projects and significantly reduced the queue, there is still 14.8 GW above the top of the Action Plan battery capacity range for 2030 and 61.7 GW above the projected battery system need in 2035. This outcome has been driven by the number of ‘protection’ measures in the connections methodologies for well‑advanced projects, such as those with planning consent, Capacity Market agreements, or near‑term connection expectations. The protection measures included in the reforms were introduced to provide fairness for developers and to seek to maintain investability of near-term projects. But we recognise that the effect of these protections, coupled with the speed with which battery technologies can typically secure planning consents relative to other technologies, has resulted in a materially higher level of battery progression to Gate 2 than anticipated. We are working closely with NESO and the network companies, as well as engaging with project developers, to understand the effects of the battery surplus, as part of our broader commitment to ensuring the reforms minimise costs for consumers and support the timely issuance of high‑quality, robust connection offers for all technologies in delivering our clean power and growth missions. Our shared objective is to ensure that the connections process remains fair, robust and aligned to strategic needs, while safeguarding investor confidence and protecting the interests of consumers. We will continue to monitor the impact of the battery connection surplus on this objective and are considering options to safeguard the delivery of the connections process should significant risks be uncovered. As a first step, we have been engaging with network companies on practical mitigations, such as expanding the use of bay‑sharing, and are supportive of steps that can help manage the effects of the surplus while maintaining a fair and efficient process. Given battery projects operate under a merchant business model without a dedicated support scheme, we recognise that some projects will likely leave the queue, and we note that some industry parties are already proposing measures via the code modification process to encourage this “attrition” through an additional financial measure, and that this modification proposal has now been granted urgency. It will be important to ensure that non-viable projects leave the queue before the network companies have committed significant capital expenditure, both for their connection and for any wider network reinforcement, and in good time to allow their capacity to be reallocated at the next connections window. The later non‑viable projects leave the queue, the greater the risk of driving unnecessary network redesign, risking knock‑on impacts for other projects, and increasing costs for bill-payers. We therefore encourage project developers to review the viability of their project’s business case and to respond to their offer accordingly in a timely fashion. We equally wish to reiterate our expectation that Gate 2 offers will be issued accurately, enabling developers to reach final investment decisions swiftly and supporting a credible pipeline for 2030 and beyond. Once offers are issued, we expect network companies to take a pragmatic approach to network build in delivering connections, reflecting the current surplus and likely attrition, and to assess funding commitments accordingly. We note that NESO ’s annual consultation on its connections methodologies sets out the possibility for the disapplication of protections under clauses 3a and 3b, such that only battery projects that have secured a revenue support scheme would be eligible in the next window. This would address further oversupply in future windows, as it is expected that an additional 8 to 20 GW of battery projects currently in Gate 1 could qualify for a Gate 2 offer. We also recognise that some Gate 1 battery projects may secure LDES Cap and Floor agreements, which would make them priorities for connection by 2030 to support delivery of Clean Power 2030 ambitions. The consultation invites wider views on whether further steps should be taken to address the surplus of battery projects. We encourage all stakeholders to respond with their perspectives. Both government and Ofgem remain committed to ensuring that the connections process is delivered efficiently and in a way that supports strategic priorities and maintains investor confidence. We will continue to work closely with all parties to monitor the impacts of the current battery connection surplus and to consider potential actions needed to support this process. Thank you once again for your continued collaboration and commitment as we work together to ensure the connections process remains aligned with our collective ambition to deliver Clean Power 2030. Minister Shanks Akshay Kaul