Electricity Storage Network response to Ofgem's minded-to decision on CMP470

The Electricity Storage Network (ESN) has responded to Ofgem's minded-to decision and consultation on CMP470, which proposes to approve the Original Proposal introducing an Oversubscribed Technologies Commitment Fee (OTCF). If confirmed, the OTCF would set a £/MW floor on the cancellation charges and securities of any technology whose queue capacity exceeds its government target by more than 50%. Battery storage is currently the only technology to meet this test, with c. 8 GW energised and 82 GW holding Gate 2 status, against a Clean Power 2030 target of 23 to 27 GW.

ESN members recognise that battery storage is materially oversubscribed in the connection queue and offer qualified support for a proportionate intervention. However, there is no consensus within the membership on the right approach, so ESN is not able to support either the Original Proposal or any of the six workgroup alternatives.

‍Confidence in connection reform

Members highlight a set of challenges from the connection reform process that are already increasing attrition among battery projects. These include significant and poorly explained increases in connection offer costs, in some cases up to six-fold, errors in offers, extended connection dates and costs and dates being revised after Gate 2 offers have been signed. An expected delay to the next CMP434 window into 2027 could also push back the activation of CMP470. Together, these issues are further undermining investor confidence at a time when the sector needs a clear and investable connection pipeline. ESN is calling on Ofgem to maintain pressure on network operators to improve the quality of connection offers and to ensure cost transparency.

A holistic approach to reform

ESN is increasingly concerned that CMP470 is being developed in isolation from several other significant reforms, including national pricing, locational procurement of response and reserve services, network charging, BSC P462, repetitive re-trading solutions and the window one LDES minded-to results. Without coordination, these reforms risk creating conflicting investment signals and unintended consequences, while recent research by LCP Delta suggests GB is set to fall 3 GW short of its battery storage deployment targets. ESN is calling on DESNZ, Ofgem and NESO to undertake a holistic review of the policy and market framework for storage, assessing how these reforms interact and establishing a clear direction for implementation.

Testing the impact assessment

Members raise several concerns with Ofgem's initial impact assessment. The £460m cost figure is a ceiling rather than an expected cost, as it assumes none of the capacity released by exiting projects is reused. Members also report that NESO's planning assumptions treat battery storage as neither importing nor exporting across transmission boundaries, meaning project exits would have little effect on wider reinforcement. The assessment prices the cost of finance at a 4.08% utility bond rate, well below the 10 to 12% cost of developer equity at this stage, and projects currently below the £3k/MW securities floor could face an average increase of £500,000 each. Finally, the baseline omits attrition already under way, such as the unfreezing of securities, the potential conversion of up to 9 GW of battery projects to data centre demand and queue management milestones. ESN is calling on Ofgem to present the £460m estimate as an upper bound, confirm with NESO how storage is represented in network planning, use more realistic finance assumptions and re-specify the baseline.

Getting implementation right

Whichever option is approved, ESN is asking Ofgem to retain deferred activation until Gate 2 to Whole Queue and the first CMP434 window are complete, allowing time for Technical Limits and other non-firm offers to be issued. NESO and Ofgem should publish the data and reasoning behind each six-monthly decision, with a formal review using actual exit data after the first two assessments and before any further escalation. ESN supports returning OTCF revenue to consumers through transmission network use of system (TNUoS) charges, and highlights bay sharing as a complementary measure that could deliver near-term benefits, particularly in England and Wales.