Connecting up – planning for industrial electrification

Aldersgate Group’s Senior Policy Officer and policy lead on industrial decarbonisation, Beth Barker, discusses some of the sector’s constraints and why grid connection reform is needed.

Planning reform and the 2030 clean power mission are two very clear priorities for the government. Whilst the early focus has been on ensuring the planning system can help deliver renewably generated energy infrastructure – doubling onshore wind, tripling solar power and quadrupling offshore wind capacity – the flipside is connecting this renewable power to energy users, from households to industry. As the government pursues its industrial growth and decarbonisation ambitions, electrification is increasingly emerging as one of the most important pathways for industrial sectors.

The National Energy System Operator’s (NESO) future energy pathways suggest industrial electricity demand will increase substantially, with a 19% and 63% increase by 2050 in two pathways (in the third pathway, hydrogen is the main route for industrial decarbonisation). While industrial electrification will significantly increase electricity demand, it also has the potential to help balance the grid where industrial sites can offer demand flexibility services. However, this presents a complex system problem for policymakers, with many factors needing to align to enable the process, including access to capital investment, affordable electricity, planning permission, and grid connections. Access to the grid is a particularly underrepresented challenge in the discussion around industrial decarbonisation but one that warrants focus. Indeed the government’s own consultation on industrial electrification found that grid connection delays were the second most cited barrier for electrification, after electricity costs.

Grid connections: what is the problem?

It can be a complex process. When a business chooses to electrify its operations further, its existing connection to the grid may not be able to service the significant rise in electricity demand. This could require a connection upgrade or even a new connection. A new grid connection or upgrade is obtained by applying to the relevant Distribution Network Operator (DNO) who will assess the technical requirements against the capacity of the local grid to ensure they can accommodate the proposed electricity connection and place the project in a queue. In cases where the distribution connection impacts the transmission network, the DNO engages with NESO on its customers’ behalf and incorporates any transmission requirements into the connection offered to the business. In a small number of cases, projects may need to connect directly to the transmission grid and undertake a connection process with NESO.

Connecting to the grid is expensive. Research from the Industrial Decarbonisation Research and Innovation Centre (IDRIC) found that industrial businesses looking to secure new and upgraded grid connections generally faced costs ranging between £100k and £75m, with most projects costing several millions of pounds. The high and inconsistent pricing for connections between DNOs has led to businesses asking for greater transparency and consistency.

The process of connecting to the grid is also slow. IDRIC research found that the time taken for connections and upgrades ranged anywhere from around 2 to over 10 years. The worst example saw a business quoted a date of 2037, 12 years later than its original requested date. This aligns with government findings which showed the average delay was 5 years. Connection delays increase costs, risk investment, and ultimately damage competitiveness and economic viability.

To support industrial electrification some businesses are seeking to install their own onsite electricity generation. However, in some scenarios, the investment case is not viable without the additional revenue stream from selling excess power back to the grid and so such projects are equally vulnerable to the grid connection queue.

There are several key reasons that businesses face significant delays for grid connections. First, there are a lot of applications for connections, some of which are very speculative, and DNOs are struggling to manage the developing queue. Second, the network is currently constrained, and significant upgrades are needed to meet future demand.  The UK Energy Research Centre investigated how ready the distribution network is to meet future electricity demand from industrial sites. They found significant network constraints are likely to develop over time, and these constraints will be experienced particularly by energy intensive industries and dispersed sites.

Clearly, much more action is needed to ensure industrial sites can electrify in a timely fashion. The government’s Connections Action Plan, which aims to cut the average time projects face in connecting to the grid from five years to six months, is a step in the right direction. But more action is needed on distribution networks, improving the connection process and ensuring the network capacity can grow to meet new demand. The National Infrastructure Commission is currently reviewing distribution networks, the issues blocking the development of new connections, the variance of connection charges and system reinforcements required. They are expected to produce recommendations to the government in 2025.

How to fix planning for electrification?

Achieving a clean power system and delivering it to customers, like industrial sites, requires a strategic approach and overhaul of the planning system. Over the last 6 months, as part of the Aldersgate Group’s work on planning, we have been looking at the government’s developing approach to producing strategic energy plans. The first is a Strategic Spatial Energy Plan (SSEP), which will outline what energy supply and demand is needed where and when. The second is a Centralised Strategic Network Plan (CSNP), to lay out the transmission networks needed to support energy supply and demand. Regional Spatial Energy Plans (RESPs) will also be developed to plan the regional distribution network requirements. Spatial energy planning has the potential to turbocharge clean power in the UK, but it must be done with demand users at the centre. The government will need to work with industrial businesses, network operators and experts to develop strategic energy plans that deliver the electricity needed for industry, providing clarity for investors, businesses, and industrial product customers.

Of course, other significant factors impact industrial electrification, including high electricity costs and the need for substantial upfront investment. But without a clear plan for the energy system and how industrial businesses fit into it, government action on wider barriers to electrification, such as electricity market reform, electricity cost rebalancing and public investment support, are being made in the face of significant uncertainty.