Britain Proposes Up to £25,000/MW Fee To Clear Battery Storage Grid Queue

Britain’s energy regulator, Ofgem, has proposed a new financial commitment fee for battery energy storage projects to address the growing number of speculative developments in the country’s electricity grid connections queue.

The proposal aims to ensure that grid capacity is reserved for battery projects that are financially committed and capable of progressing toward construction. Ofgem said the measure could help remove stalled applications, improve network planning and accelerate connections for viable energy storage projects.

Around 90 GW of battery capacity is currently either operational or included in Britain’s reformed grid connections queue. This is significantly higher than the estimated 29 GW of electricity storage capacity that could be required by 2035. Despite recent measures to reduce the number of inactive projects, the queue remains around three times larger than projected requirements for the coming decade.

Ofgem said the large backlog creates challenges for network operators because it makes it difficult to determine which projects are likely to proceed. Speculative applications can also reserve limited grid capacity, potentially delaying projects that are ready to build and increasing uncertainty around future network investment.

To address the issue, Ofgem is consulting on the proposed Oversubscribed Technologies Commitment Fee. Under the proposed mechanism, battery storage projects would need to demonstrate financial commitment to retain their place in the connections queue.

The fee would initially be set at £3,000 per MW and could increase to as much as £25,000 per MW when the level of oversubscription remains high. Developers would be required to provide financial backing through mechanisms such as cash collateral, letters of credit or guarantees.

The proposed mechanism would be activated when the amount of capacity requested by a particular technology exceeds its targeted demand by more than 50%. The fee would remain applicable until oversupply falls below 25%.

The National Energy System Operator (NESO) would be responsible for monitoring the level of oversubscription and determining when the fee should be introduced or adjusted. The mechanism is intended to encourage developers without firm plans or sufficient financial commitment to withdraw their projects from the queue.

Ofgem said that any cancellation charges collected from projects leaving the queue would ultimately be returned to consumers through reductions in network charges.

The regulator highlighted the importance of large-scale battery storage in supporting Britain’s future electricity system and clean energy transition. However, it said the grid connections queue needs to reflect projects that are genuinely progressing rather than applications that effectively act as placeholders.

The proposed financial commitment mechanism forms part of wider reforms to Britain’s grid connections system, which are moving away from the traditional first-come, first-served approach toward prioritising projects that are ready to proceed and aligned with system requirements.

Ofgem has opened a two-week consultation on the proposed changes, with a final decision expected later this year.