Gate 2 was necessary, but grid reform must now focus on delivery

• 14 days ago (2026-04-02)
• Junior Isles

Decentralised energy 7 Transmission 236

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Simon Reilly, Chief Executive of Aurora Utilities

Britain’s energy transition hinges on an unglamorous but critical task: connecting new projects to an over‑stretched electricity grid.

The National Energy System Operator’s (NESO’s) Gate 2 reform was designed to clear the queue. The idea was that it would replace “first‑come” with “first‑ready” and scrub “zombie” projects.

That intervention was necessary, and it has helped restore confidence that reform is possible. But Gate 2 also exposed the limits of queue management alone. Without complementary regulatory reform to expand how grid capacity is delivered, there is a risk that access is shaped less by strategic value and more by who can move fastest within existing constraints. This is why Ofgem’s recent call for input on demand connections reform is so important: it signals recognition that reform must now go beyond queue discipline and address the underlying structure of the system itself.

Billions are ready, but confidence is fragile

In late 2025, we surveyed 800 senior infrastructure leaders across investment funds, independent connection providers, renewables developers and property developers. The results are striking. Almost every respondent (98 per cent) has capital committed to projects that will need a grid connection by 2026; six in ten have earmarked between £50 million and £250 million over the next two years. Nearly three quarters (74 per cent) believe NESO’s Gate 2 process could reduce connection delays, and two‑thirds (68 per cent) view the reform as a positive investment opportunity.

This optimism is tempered by caution however. Almost half of respondents (46 per cent) fear the reforms will favour the larger players, potentially squeezing out smaller developers – those with less capital, smaller headcounts or less experience. High connection or upgrade costs would make 44 per cent of respondents decide not to build a project or surrender their connection; 41 per cent point to land‑rights hurdles and 40 per cent cite planning approval delays. Delays can be devastating, for example, a 12‑month connection delay can inflate project costs by up to 30 per cent, which in reality might add tens of millions of pounds to a development.

Such sentiments underscore how much rests on how NESO and Ofgem execute the reforms in 2026.

What Gate 2 changes, and whom it helps

Under Gate 2, generation projects in the grid queue are      reordered according to readiness rather than arrival date. NESO assesses projects on land rights, planning permission, financing and deliverability. Projects meeting the criteria move to the front and receive firm (non‑indicative) offers, while others are demoted or removed.

Developers who have progressed through Gate 2 can start planning and ramp up or slow down development depending on where they sit in the queue. Yet funding cannot be secured until they receive formal connection offers, and those offers have been delayed.

While developers now know roughly where they sit in the queue, delays in issuing firm connection offers mean funding remains on hold. And, as of early February 2026, developers are still waiting for the first batch of offers. The uncertainty and frustration is akin to circling Heathrow while waiting for permission to land.

The winners under Gate 2 are mainly solar generation projects. Solar farms generate new green electricity and directly contribute to the government’s Clean Power 2030 (CP30) targets. NESO have clearly prioritised new renewable generation projects over energy storage/management projects like battery energy storage systems (BESS) in an effort to meet the CP30 targets.  BESS developers are therefore struggling to secure connections, despite their vital role in the future of clean power.

Another risk our survey highlighted was that small developers and community projects could be squeezed out, due to an inability to compete at scale. Large developers have submitted dozens of projects in some cases, with the expectation that the probability means that at least some will secure capacity, while smaller companies may have only one or two opportunities so the odds are stacked against them. Deep pockets also enable bigger players to meet readiness criteria, such as funding transformer purchases or securing land rights, before receiving an offer.

Gate 2 has created a survival‑of‑the‑fittest ethos. This was not an unintended consequence but a design choice: the reform prioritises projects that align with clean‑power goals and can move quickly, even if that privileges well‑capitalised firms.

What is the solution?

NESO and Ofgem should focus on quick wins rather than waiting for a perfect, all‑encompassing solution. One opportunity is to clarify the definition of a transmission asset. Currently, generation developers can self‑build networks and connect directly to the transmission network, but demand users (such as data centres) cannot. Allowing both supply and demand to be treated as transmission assets would let demand‑side players to self‑build connections, helping to ease the queue of demand projects waiting to be connected to the transmission grid. Ofgem launched a consultation on the 13th February asking for thoughts on how to reduce the queue of demand projects waiting for connections, so the problem Gate 2 was created to solve for generation projects now also exists in the demand queue. This regulatory “tweak” would help ease this problem.

Another “no‑regret action” would be to open the connections market to more competition. Today only transmission network operators can build and own high‑voltage assets (above 132 kV in England & Wales and 33 kV in Scotland). Creating an independent transmission license, analogous to the distribution IDNO model, would reduce reliance on incumbent operators and ease bottlenecks for customers looking to connect to the grid.

The distribution network already has a competitive connections model where new connections are largely adopted and operated by independent distribution network operators (IDNOs) rather than relying on incumbent DNOs to connect new customers to the grid. In 2024 more than 80 per cent of new connections on the distribution network were adopted by IDNOs - according to the Independent Networks Association (INA). It is therefore a proven model that has evolved over the last 20+ years so why not replicate this on the transmission network?

Many of the customers we work with at higher voltages already at distribution level are asking us to help on projects on the transmission network so there is     clearly an economic demand for such a change. Similarly key industry stakeholders including NESO and DESNZ are keen to remove the constraints that are preventing the grid from maximising the value it can deliver for UK PLC. But ultimately, the key to unlocking this, sits with Ofgem as this requires regulatory change. However, given the precedent regulation that already exists within the distribution and offshore transmission networks this should not be unsurmountable. To the contrary, the steps outlined above could be put into motion immediately and truly deliver quick wins.

A just transition is within reach

Gate 2 has been an important intervention, but it was never intended to be a complete solution. Developers have committed billions of pounds to projects that depend on receiving firm connection dates, and delays at this stage directly undermine confidence and increase costs. The lesson from Gate 2 is not that queue reform is ineffective, but that it must be accompanied by regulatory change that expands how capacity is delivered.

A fair energy transition cannot be achieved through queue management alone. It requires a regulatory framework that enables investment to move at pace, supports innovation and recognises the full system value of generation, storage and demand. That means creating the conditions for competition, ensuring proportional and transparent readiness requirements, and giving developers (large and small) clearer routes to connection.

Most importantly, it requires regulators and government to focus on delivery. Ofgem’s current consultation on demand connections is an opportunity to move beyond process reform and address the structural constraints that sit behind the queues. By opening delivery to competition and aligning rules across generation and demand, the system can unlock capacity faster without compromising security or oversight.

Gate 2 has shown that reform is possible. The next step is to ensure that regulatory change enables the grid to be built, not just managed. If demand connections reform succeeds in doing that, it will help turn net zero ambition into infrastructure on the ground, and ensure the energy transition is both investable and deliverable.