Rising grid constraints costs: Legal comment
The National Energy System Operator (Neso) has been required to submit an annual report to Ofgem, outlining the chance of high-risk grid events and the cost of managing them.
Commenting on the news, Zoe Stollard, Partner in energy and infrastructure at UK and Ireland law firm Browne Jacobson, said:
“Neso's repeated failures to meet reporting obligations undermine the regulatory certainty that developers, investors and contractors need to make critical infrastructure decisions. The ten-year supply statement exists precisely to inform connection planning; investment stalls without it. Ofgem's decision to lower grid inertia standards despite expert panel reservations compounds this, introducing risks that are anything but abstract for those structuring long-term energy contracts. With strategic planning documents now delayed to late 2028, leaving under 18 months before the clean power deadline, Neso and Ofgem must recognise that timely, transparent reporting is a prerequisite for mobilising the private capital and supply chains the energy transition depends on.
“The headline figure of £3.2 billion in constraint costs is the logical consequence of a well-documented structural failure: wind generation capacity has been built out at pace, but the transmission infrastructure to move that power from where it is generated, predominantly Scotland, to where it is consumed has not kept up. The result is a perverse and expensive loop: wind farms are paid to switch off, gas plants are paid to switch on - and consumers foot the bill for both.
“For those advising on energy infrastructure contracts, this is fundamentally a risk allocation problem. Developers and contractors building wind assets in constrained zones face curtailment rates exceeding 70% at some sites, undermining the revenue assumptions underpinning project finance and PPA structures. With constraint costs projected to reach £4-8 billion annually by 2030, the urgent question is whether the regulatory and procurement frameworks can mobilise grid investment fast enough to matter.”
Contact
Felicity Spencer-Smith
PR & Communications Manager
felicity.spencer-smith@brownejacobson.com
+44 (0)3300451376
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