Since April of this year, Britain’s six Distribution Network Operators (DNOs) have been able to charge fees for all new applications for connections to the distribution networks. The charges come at a particularly sensitive time for the solar industry, with deployment running at low levels and developers under tremendous pressure to make project economics stack up.
For the utility sector, the lack of quality, real-time information on grid availability means that developers have to put in multiple connection applications to try to identify potential sites.
So what do these charges mean for the UK solar industry, and what is the STA doing about them?
First of all, what are A&D fees?
Whenever a generation customer asks for a new connection to their local distribution grid, DNOs are legally obliged to try to find them one, at the lowest cost and at the right voltage to accommodate the customer’s desired output capacity. With Britain’s 14 distribution grids becoming increasingly crowded and complex, this can be quite a challenge. Since 6 April 2018, DNOs have been permitted to charge an A&D fee to recover the cost of responding to connection requests.
Who has to pay these new fees?
This depends on how much capacity you are attempting to connect, and where. For some DNOs, these fees would be charged for anything larger than a domestic rooftop PV system, while for others they would only be charged for the highest-voltage connections. So who has to pay depends on where you are in the country and what size of project you are trying to build.
How much are they?
The emerging charges vary considerably between the different DNOs and the voltage level required for the particular connection. For example, Northern Power Grid will charge up to £620 even for a small generator (for example, solar on an office) to be given even the most basic indication of whether they can connect to the grid. Meanwhile, for a full, formal decision on whether a solar farm or large rooftop project can connect there can be nearly an eight-fold difference in the cost between DNOs, with costs ranging from £1000 to nearly £8,000 per application.
Figures compiled and verified by Keir Spiller, MJS Grid Services
Is that fair?
Engineers’ time and effort goes into preparing an offer for each grid connection applicant. We recognise this, and we agree that A&D charges will help to keep down the number of applications taking up space in the queue for new connections. In theory, charging should allow DNOs to offer a better service to the most committed applicants.
However, we are concerned by the level of some of these charges, and by the discrepancies in charges between different DNOs, as it suggests a considerable disparity in their methodologies for determining charges. There is a real lack of transparency in how these charges are determined and such wide variation naturally raises questions about whether they are, in fact, cost-reflective and cost neutral. BEIS’s own impact assessment on the proposed A&D charging framework suggested that charges would be uniform across all service areas and that the charges would only be introduced from January 2019. In fact, all but one of the DNOs has already started levying these charges. And the charges raise important questions about whether such wide national variation is sensible or fair.
The STA’s stance
The current piecemeal approach, with some clearly excessive charges, is cause for concern. Charges must be reasonable and generators are entitled to expect a better service in return. We are therefore engaging individually with DNOs, with Ofgem and with the Energy Networks Association to improve the A&D charging framework.
We are urging the DNOs to:
- Level the playing field nationally by implementing uniform charges and charging criteria across all DNO service areas going forward,
- Publish detailed and up-to-date information on all costs incurred in preparing connection offers, on at least an annual basis, to improve transparency and accountability
- Provide additional and improved channels for dialogue with generation customers, communicate more effectively with generators throughout the connection application process, and provide detailed information as to why a connection application was rejected, and proposing possible alternatives.
The DNOs will be discussing our recommendations at their Distributed Generation forum in August, and we will be sure to update members once we hear about the outcomes of that meeting. We invite members to continue to send us their real-world experiences of these charges.
Ultimately, we agree that reasonable A&D charges are justified and can play an important role in reducing the queue for new connections, and freeing up DNO resources to improve customer service. However, there is no reason why these charges cannot be transparent and fair and uniformly implemented across the UK. And ideally, we would like to see the DNOs develop much more up-to-date ‘heat maps’ so there is less guesswork and resource wastage involved in identifying connection opportunities.
With special thanks to Keir Spiller of MJS Grid Services for expert technical advice and insights
Blog by Nicholas Gall,
STA Policy Analyst
Prior to joining the STA, Nicholas worked in policy analysis and advocacy at two leading Canadian environmental charities, and completed internships at the International Energy Agency and the London office of the Climate Policy Initiative.
Nicholas holds an MSc in economics and policy of energy and the environment from University College London, and a BA in economics from Dalhousie University. His MSc dissertation addressed the impact of project financing costs on solar PV deployment across Sub-Saharan Africa.
For more information please contact Nicholas – firstname.lastname@example.org