One of the subsequent impacts of this is that many large-scale projects are essentially no longer needed by the UK energy system. 

Projects seeking to connect to the distribution network above a certain capacity must undergo assessment for their impact on the transmission network. The National Energy System Operator (NESO) is considering raising the lower threshold in England and Wales for this assessment, known as CMP446. This will potentially eliminating a barrier for smaller generation projects to connect directly to power consumers. This shift favours smaller-scale private wire schemes that can link energy sources directly to users, such as on industrial sites, creating a beneficial scenario for project developers, landowners, and occupiers alike.

What are the barriers to private wire connections?

The business case for private wires has been and remains more complex compared to standalone generation supplying directly to the grid. Consequently, funding these projects can prove to be even more challenging.

One of the primary barriers to delivering highly valuable private wire generation projects has been the risk associated with off-takers (the consumer), particularly the possibility that they may default or fail to utilise the power, leaving no alternative market for it due to the lack of a grid connection. However, the new proposals would allow small scale projects much easier access to the grid, thereby simplifying the deliverability of these projects.

What is the impact for project developers?

There are also several advantages to private wire schemes for developers. Overall project values for these types of projects can be more than twice as valuable than generation being directly fed into the grid and quicker to deliver due to the smaller scale, highlighting their appeal.

How are landowners affected? 

Similarly, landowners are seeing rental incomes per acre up to double those of standalone grid connected generation. The opportunity for landowners to self-develop and capture a larger share of the project’s value is also greater, as these projects are typically smaller than those feeding directly into the grid.

In general, the closer the energy user, the more efficient the system. Projects over distances of 3 to 5 km are easily achievable, while sites generating several megawatts can support distances of up to 10 km, provided there are no complications with third-party landowners along the route.

What’s the story for occupiers?

Occupiers will benefit in several key ways. First, they can expect a significant reduction in energy costs, potentially up to 50% compared to current prices. This not only delivers immediate savings but also provides long term cost certainty, helping to mitigate financial risks associated with energy price fluctuations.

Another major advantage is the use of private wire connections from renewable sources such as solar or wind. This ensures access to low carbon energy that meets the highest ‘Gold Standard’ classification set by the UK Green Building Council (UKGBC). According to Uswitch, the Gold Standard includes tariffs that contribute meaningfully to expanding and promoting renewable energy. This includes direct investment in future renewable generation projects and innovations that support the wider adoption of clean energy.

Further information

Contact Phil Pearson

Demystifying Clean Power 2030 for developers