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01 / Introduction

Regional distribution network operators (DNOs) are facing serious challenges. The new government鈥檚 ambitions to deliver a decarbonised grid and domestically generated electricity come on top of increasing point load demand from modern buildings.

Distribution network capacity issues in west London, Slough and Cambridge, among other areas, have often become major news stories, and even the previous prime minister鈥檚 swimming pool famously made headlines for requiring an upgrade to the local electricity network.

>>See also: Infrastructure update: Electricity transmission owners hold key to UK鈥檚 energy transition but face challenges

A 2023 policy paper entitled Powering Up Britain reported that, in some parts of the country, connection times have become 鈥渁 significant issue鈥� for implementing new energy supplies and that reducing connection timelines is a high priority for the government.

This article will look at the reasons for the current capacity crunch and outline what a project team can do to navigate this hurdle.

02 / What has driven the connection capacity crunch?

Growing demand

The capacity crunch is a product of the number of applications for new connections, coupled with the size and scale of some of these connections.

Grid supply points (GSPs) are the interface between the transmission network and the distribution network. Constraints in the distribution network mean that, increasingly, connecting distribution customers are finding that their connection offers interface with these grid supply points and could trigger upgrades to the wider transmission network. At a recent stakeholder forum, one DNO reported that 35 of its 59 GSPs have a transmission constraint, yet demand continues to grow.

While electrical appliances are becoming increasingly efficient, we use more of them in modern life, which means more power is required. The latest Digest of UK Energy Statistics (DUKES) reported that the UK used 316.8TWh of electricity in 2023, and the UK鈥檚 last Climate Change Committee report forecast this usage to increase to between 550TWh and 680TWh by 2050, depending on the route to net zero.

Additionally, the UK鈥檚 low carbon ambitions have encouraged an all-electric revolution which takes advantage of the lower carbon emissions from an electrical grid powered by large-scale solar and wind energy. This electrification is changing how we heat and power our buildings and how we power our travel. For example, traditional gas-fired boilers are being replaced by heat pumps, and electric car charging points have become a requirement of new residential developments. This all puts more demand on the electricity network.

This organic increase in the demand for power has occurred before we even begin to consider growth in energy-hungry sectors such as data centres or life sciences. The presence of data centres in the UK is rapidly expanding to support the digital age, and their power requirement can be as much as 20 times that of a London tower, or the equivalent to a small town.

The tendency of these high-energy users to cluster together in science parks can compound the issue by focusing demand on a single location; the city of Cambridge and south Cambridgeshire consume approximately 1.49TWh of energy every year, and the region鈥檚 demand is expected to triple during the next decade.

Renewables: friend or foe?

Renewable energy is key to unlocking the UK鈥檚 energy supply problem, but it plays its own part in the capacity crunch. The previous government, in its energy white paper (December 2020) and net zero strategy (October 2021), announced ambitions for a 鈥渓ow-cost, net zero consistent electricity system [that is] most likely to be composed predominantly of wind and solar鈥�.

This creates a logistical problem for the transmission network, which needs to reconfigure the infrastructure away from centralised coal-fired plants (which follow the coal seam along the spine of the UK) to a more diffused network of renewable power generation.

Subject to scale, some of the new on-shore solar farms could be connected directly to the distribution network, but they may require a significant amount of reinforcement and that could include new substations, pylons, overhead and below-ground cables.

03 / The challenge of upgrading the distribution network

The high-voltage transmission network is linked to homes and businesses through a lower-voltage distribution network. It can also loop in smaller sources of energy generation such as solar or wind farms. To connect new customers, the distribution network needs significant upgrades and extensions such as transformers to step down the voltage with new pylons and cables to distribute energy. Britain鈥檚 network is run by 14 regional DNOs, with some independent distribution network operators (IDNOs) owning and operating smaller sections of the network.

A 2022 report for the Department for Business, Energy and Industrial Strategy found that there was approximately 60% spare headroom across all distribution networks assets in Britain, but this is not evenly spread and it will be removed as we approach net zero. DNOs are working to address this growing imbalance, but the work is less than straightforward. They must navigate access issues, material shortages and changing customer needs, while acting within regulations governing the efficient operation and development of these networks.

Standardisation

Upgrading the distribution network to allow for a new connection is not a simple task. The network is heavily standardised, sometimes with only a few suitable approved manufacturers because of the stringent criteria that ensure reliability and robustness. The impact of this can reduce the pool of materials across the market as connecting customers seek to benefit from this approved materials list.

The issue is further compounded by the global nature of the necessary products. Europe and the US are each pursing their own ambitious renewable energy targets, which has created intense demand for parts. Market feedback suggests that lead times for vital components such as transformers have lengthened 鈥� in some cases even doubling 鈥� as demand outpaces supply, with suppliers sometimes hesitant to increase their production capacity because of a lack of visibility around the long-term pipeline of work.

The ultimate impact of this crunch is clear: new energy-generating capacity could be left idling while it awaits a grid connection, or projects may be unable to get power in the timescales they planned for.

Cabling problems

The position of cables can also slow the process down. Electricity distribution network operators are bound by regulation to deliver an economic and efficient service. To do so, overhead lines are a strong starting presumption (except in designated landscapes) as they are generally more cost-effective than underground cabling, which could be five to 10 times more expensive, and more disruptive to traffic. Yet overhead lines often gather a significant amount of local opposition, due to their visibility, and this causes delays in the development process.

At the same time, putting power lines underground is becoming increasingly difficult because of utility congestion within the roadway. To accommodate additional power lines underground, other utilities will often need to be moved out of the way.

Skills shortage

The enduring skills crisis seems to touch all parts of construction, and the utilities sector is no different. The Institute of Engineering and Technology estimates that there is a shortage of 173,000 workers in the STEM sector, and a lack of high-voltage engineers will impede progress on any upgrades, especially upgrades at any real pace.

Both DNOs and transmission operators require an increasing number of skilled people to decarbonise the system and expand the network. A recent report by Baringa for the Department for Energy Security and Net Zero in April 2024 referenced 鈥渟ignificant shortages鈥� across a wide range of roles, including cable jointers, transformer installers and overhead linesmen. The report also reports: 鈥淥ne network operator interviewee reported that their main contractor had estimated that the trades and installation workforce would have to double by 2028 to meet network demand.鈥� The power challenge is an international one, making it difficult for the UK to meet its recruitment needs internationally.

04 / What does this mean for projects?

In areas with limited capacity to connect new customers, a connections queue will form. At the beginning of the year, energy regulator Ofgem estimated that the queue amounted to 701GW and would rise to 800GW by the end of the year (for comparison, 1GW could power 500,000 homes).

For developers seeking a substantial grid connection, large delays are thus a very real prospect. A connection date in the mid 2030s is not unusual when a project requires significant reinforcement at transmission level. This delay is a product of multiple tensions: the sheer number of connections, the scale of modern connections, workforce constraints, plant delivery times, and the time to deliver the works. A recent open letter from technology industry lobby group TechUK warned that 鈥済etting access to power has held back some key digital infrastructure projects鈥�.

Customer connections

The process of obtaining a large connection is not straightforward. Often, large-scale connections that require an interface to the grid (for either import or export) may require a modification application to be submitted to the transmission operator for it to assess the overall impact on the network. The number of modification applications has reached unprecedented levels in recent years. The resulting transmission impact assessments (TIAs) are not only complex but also add to the delay, because of the ever-increasing number of connection applications that the national energy system operator is processing. The outcome of these TIAs will determine what work needs to be undertaken to accommodate a new connection that involves the transmission network.

Queue management

Queue management is necessary to ensure that projects are progressing against their contractual milestones, and to see if any capacity may be released back onto the market.

Ofgem and DNOs are working together to identify customers in the connections queue that they view as 鈥渮ombie projects鈥� or organisations attempting to ringfence capacity in the network without an immediate plan of work. The Energy Networks Association (ENA) 鈥� which represents the companies that operate the energy networks in the UK and Ireland 鈥� has published some guidelines detailing connection milestones against which customers must be able to demonstrate progression. Recently, one DNO alone announced that it removed 1.5GW of stalled projects from the queue in 2023.

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The queue currently works on a 鈥渇irst come, first served鈥� basis, with no prioritisation for build speed, readiness or strategically important infrastructure. However, reforming the transmission system to a 鈥渇irst ready, first connected鈥� basis is being discussed by the ENA to speed up those projects that are ready to go, and could halve the number of projects in the queue. The ENA reports that many projects with a connection offer are not ultimately completed by the customer, and states that there is a 60% attrition rate at transmission level. It claims 90GW of capacity could be released by a change in approach.

Recently some DNOs have been workshopping an alternative solution of granting earlier access to available capacity via a type of place-swapping between customers, dependent on readiness to utilise. However, this would rely on establishing a fair and balanced mechanism that allows for such place-trading, something that is as yet quite undeveloped as an idea.  

Distance to connection

Sometimes adequate power is available only at a considerable distance from the development site, necessitating extensive roadworks with a heavy cost in terms of time and money. Developers sometimes seek to employ multiple workfaces along a route in order to speed up the time taken to lay the new connection, but this method is often opposed by local authorities which do not want to see local residents caught in an endless series of traffic lights.

Longer distances bring particular challenges, with special engineering difficulties such as bridges, crossing railway lines, or heavily trafficked areas, all of which bring risk and additional cost. While contractors can assist with early route planning and pricing, this can often be at the expense of a loss of competition. Specialist and independent route planners can provide a tested route and a bill of quantities, which can then be used in a competitive bidding process for the selection of an independent connection provider.

Independent connection providers and DNOs

Deregulation within the electrical utilities market introduced competition by allowing companies to develop and operate small, local electricity networks and encouraging them to compete to connect new customers to these distribution networks.

A further benefit of this deregulated electricity market is 鈥渃ompetition in connections鈥� which allows developers to competitively procure new power infrastructure in alignment with any other construction work package, taking advantage of a proven supply chain, generally referred to as independent connection providers (ICPs). ICPs are accredited by the National Electricity Registration Scheme (NERS) and can carry out work on behalf of clients on the electricity network.

Engaging with the ICP market to undertake contestable works (work that approved contractors can carry out independently of the DNO) for scopes of work attributed to a new connection offer could generate construction efficiencies and reduce local disruption. It could also give a commercial benefit to the client if carried out in a structured manner under a competitive tender process.

05 / Solutions and best practice

For large connections, developers will be aware that connectivity issues are a key priority when identifying potential development sites. The capacity crunch in the distribution network can have a serious impact on a development awaiting a grid connection in a location with low excess capacity.

Some key solutions and best practice to secure a timely connection to the network are:

• Seeking advice from experienced professionals within the sector.
• Understanding and making astute use of the deregulated utilities framework that has been developing over the past 25 years.
• Obtaining a utilities connection offer as an early action for the project. This offer will give the development team some assurance of the availability and timescales to serve a development with power.
• Clients and their consultants carefully interrogating the offer and understanding any limitations or special conditions that could impact delivery times as soon as possible (such as a modification application for changes upstream of the DNO).
• Developers evaluating the respective benefits of choosing to have the DNO provide a full turn-key solution or opting for independent connection providers to deliver the 鈥渃ontestable鈥� works, which can often provide a good-value alternative in the delivery of these works.
• Built assets potentially being adopted by the incumbent DNO or an independent DNO, which may offer an asset value in return for adoption. Accredited NERS ICPs to carry out these works can be found on the Lloyds Register website, while DNOs and accredited IDNOs are listed on the Ofgem website.

The issues around power connection are fully recognised by energy companies, Ofgem and the government, which are all taking steps to tackle the challenges facing developers. Until these reforms and upgrades take place, however, developers need to understand how to achieve success on their projects by engaging with a knowledgeable team early in the development programme, to understand the impact of the situation and any mitigations.