How capacity reservation and flexible ramping rates can reduce developer costs

As demand for electrification accelerates across the UK, commercial developers are facing a critical hurdle: obtaining a cost-effective grid connection, and fast. For larger developers –particularly those involved in commercial or mixed-use projects – the pressure has intensified. This challenge has been amplified by Ofgem’s recent Targeted Charging Review (TCR), which has reshaped how electricity network costs are allocated, disproportionately affecting those with large-scale developments. Now more than ever, developers need to explore strategies to minimise these rising costs.

Fortunately, innovative strategies like capacity reservation and flexible ramping rates are emerging as essential tools for developers aiming to reduce grid connection costs and handle these evolving regulatory pressures.

Targeted Charging Review: how does it impact developers?

One of the ­major outcomes of the TCR is the move away from network charges being heavily based on electricity consumption, and rather towards fixed capacity charges. For larger developers, this means that their network charges will no longer primarily depend on how much electricity they use, but rather on their network capacity and connection to the grid. Even if a site has lower electricity usage, following the TCR’s new remodelling, developers will still face network charges  for day one, if their connection size or maximum demand is large, making capacity planning crucial.

The changes hit developers of data centres, industrial sites, and commercial facilities particularly hard, as they require significant upfront capital to access the grid, irrespective of when or how they will use that capacity. For those trying to keep projects viable, managing these upfront costs has become critical. This is where capacity reservation and flexible ramping rates offer solutions, providing developers with tools to spread costs and manage energy needs more effectively.

Energy on demand

The Capacity Reservation Model, together with flexible ramping rates, offered by Independent Distribution Network Operators (IDNOs) such as Vattenfall IDNO, provides an adaptable alternative for developers seeking grid access. Unlike traditional Distribution Network Operators (DNOs), which often operate under more rigid structures, Vattenfall IDNO collaborates with developers from the beginning of their projects, understanding their unique energy needs and securing capacity on their behalf.

Capacity reservation is a strategy that allows developers to secure future grid access without the need to pay for the full capacity upfront

explains Suzanna Lashford, Head of Business Development at Vattenfall.

Securing capacity ahead of time ensures developers can lock in the power they will need for future phases of their projects without incurring immediate financial penalties.

This approach allows developers to scale their energy consumption in line with operational growth, avoiding inefficiencies associated with traditional procurement models that often require securing full capacity based on future projections. The flexibility of ramping rates ensures that energy costs are aligned with actual usage, supporting sustainable growth and long-term decarbonization efforts.

Reducing financial risk

Both capacity reservation and flexible ramping rates reduce the financial risk associated with securing large grid connections, concludes Lashford.

It’s imperative for developers to anticipate their future capacity needs and secure them in a way that doesn’t overburden them financially at the start. Capacity reservation and ramping rates give them the breathing room they need to grow sustainably and affordably.

Looking ahead, these strategies will be essential for navigating the future of the UK’s utilities landscape. As businesses push toward net-zero targets and energy demand increases, developers who understand and leverage capacity reservation and ramping rates will not only save on grid connection costs but also ensure they are well-positioned for long-term success.

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