The Relevance of Secured Land Rights to the Grid Connection Queue
It is well documented that the process for obtaining a grid connection offer is changing. The changes have been under discussion for some time now under the banner of “First Ready, First Connected” (or “TM04+”), but the birth of NESO, the new system operator for Great Britain, coupled with the introduction of the Government’s Clean Power 2030 Action Plan (“CP30”) has shone a spotlight on the debate.
At the beginning of November, NESO published a number of consultation documents, including the “Gate 2 Criteria Methodology”. This particular paper sets out the proposed criteria for projects to become “Gate 2” projects, including securing land rights – in other words, one of the possible criteria to secure their spot in the queue for a grid connection.
The proposals, aimed at ensuring projects are viable, strategically aligned with CP30 and ready to proceed efficiently, are clearly of huge significance to developers. They create a myriad of requirements for projects to support alignment with CP30 and increase the chances of successful project completion. However, these measures are also of significance to every professional involved in negotiating land deals for energy projects. This is because, along with satisfying those other requirements, NESO’s proposals state that if the commercial terms of the relevant land deal do not meet the Gate 2 criteria, the project will not secure that crucial spot in the grid connection queue.
As it stands, the proposed Gate 2 Criteria Methodology requires developers to evidence secured land rights for the area hosting the main generation/storage apparatus for the project, as follows:
1 Option to take a Lease or to Purchase sufficient land to deliver the project (Option Agreements)
- If the land is secured through an option agreement, it must be exercisable for a period of at least three years from the agreement date (subject to NESO discretion).
- There will be an ongoing compliance requirement to keep the land under option by way of extensions or further agreements until the “Completion Date” (contracted connection date).
- The lease or (if relevant) the purchase conditions must reflect the typical operational timelines for that type of project. In the case of a lease, it will be for a minimum term of 20 years from the date the option is exercised (unless for a test/demo project or lesser operational life is justified to NESO) to help ensure the project has long term stability.
2 Existing Land Ownership
- Existing ownership. Projects can demonstrate that they own the land required for the project.
3 Existing Lease
- The existing lease must have a remaining minimum term of 20 years from the date of submission of Gate 2 evidence, unless a test/demo project or lesser operational life is justified to NESO, again to help ensure the project has long term stability.
As well as securing land rights, projects will also have to demonstrate:
Minimum Acreage
- The methodology stipulates the land must meet minimum acreage requirements, fixed for each technology and reviewed each year to ensure sufficient space to operate effectively.
Original Red Line Boundary
- Developers must submit the original red line boundary plan showing the land secured and fixing that boundary for connection purposes.
The above will be subject to a few exceptions, for example inability to complete an option agreement because of an intervening death of a landowner during negotiations.
There is also the proposal to introduce an alternative route to achieving Gate 2 ready status via a DCO planning route, by submitting a DCO application and receiving a planning reference number from the relevant authority. As the DCO route is not at present available in Scotland, this would draw a distinction between options available to projects North and projects South of the border.
The satisfaction of the criteria will also need to be verified by NESO through the submission of the relevant documentation. This raises usual issues of commercial confidentiality, which NESO have sought to address by noting that redacted documents will be permitted.
Consultation on these proposals will run until 2 December 2024. The target date for introducing these requirements is Q2 2025, and crucially it is intended that they will apply retrospectively to the existing queue as well as new projects ahead … land agents and lawyers, take heed.
