What Gate 2 means for energy projects

Background 

In April 2025, Ofgem approved NESO’s connection reforms model – replacing the old ‘first-come, first-served’ model to streamline and accelerate the UK’s green energy goals. This was implemented through a structured, phased rollout and included: 

• filtering out unviable projects that lacked funding or planning permission; 

• required evidenced readiness through secured land rights and submitted planning applications; 

• necessitating the alignment of energy projects with the Clean Power 2030 plan; and 

• confirmation of exact connection dates for delivery, with Phase 1 targeted connection by 2030 and Phase 2 targeted connection by 2035. 

The most promising projects are then awarded “Gate 2” status.  

Since then, the practical implications of these reforms have started reshaping the energy development landscape. Developers are now operating in an environment with inherently prolonged grid connection timelines and continued uncertainty – driving a notable extension of option periods as parties seek to maintain control over unforeseeably longer delivery horizons. Concurrently, the transition to a more logically selective, readiness-based system has resulted in a significant reduction in battery storage projects, with several schemes unable to meet Gate 2’s stricter criteria or completely falling outside the system requirements.  

In parallel, the market has since entered an ‘adjustment period’. While there remains a series of viable projects, overall activity appears slower as developers await confirmed connection offers, reassess project viability, and navigate unpredictable delays associated with the ‘new-and-improved’ regime.  

Variation in option periods – why are they longer now?  

According to Ofgem, projects are now facing multi-year delays (in some cases exceeding 10 years) in securing grid connections. Major projects have since reported losses of tens of millions, while others face inflated costs of up to 200% and cancelled schemes due to constrained investments and supply chain delays. These pressures directly affect option agreements, as developers may no longer be able to bring projects forward within the originally agreed option period. 

This is a direct consequence of developers facing a more uncertain and prolonged delivery environment. Connection dates are increasingly being pushed into the 2030s, and in some cases beyond the original longstop dates agreed with landowners – creating a commercial risk. If a developer cannot secure a viable grid connection within the option period, the option may expire before the project can progress.  

As a result, developers are seeking longer option periods to preserve land rights while they wait for Gate 2 offers, manage increased grid costs, and reassess whether projects remain financially deliverable. For landowners, this may justify higher option payments, but it also requires a more careful balance between maximising short-term returns and ensuring the project remains attractive to a credible, well-capitalised developer. 

This wider concern has also been recognised at regulatory level. Akshay Kaul, Ofgem’s Director General for Infrastructure, has emphasised that although the connections queue has already been reduced by nearly two-thirds, further scrutiny is needed to ensure that network operators deliver connections quickly enough to support Britain’s energy transition – reinforcing the commercial pressure behind longer option periods. Until connection dates become more reliable, developers are likely to continue seeking extended longstop dates to protect projects from delay. 

Less battery storage options – why the sudden drop? 

The sudden drop in battery storage options is largely a consequence of the connections queue being reset from a speculative ‘first-come, first-served’ system to a readiness-based model. Under the old regime, BESS projects were able to enter the queue in very large numbers, even where land rights, planning progress, funding, or a clear route to delivery were uncertain. This created a heavily saturated pipeline, with battery storage capacity far exceeding what was required for the UK’s 2030 and 2035 clean power pathways. NESO’s Gate 2 process has therefore acted as a filter: only projects that can demonstrate sufficient readiness and strategic alignment are likely to secure a firm connection date. In practice, this means that many standalone battery schemes have been pushed into Gate 1, delayed, or fallen away entirely, while projects with protected status or stronger evidence of deliverability are prioritised. 

Commercial factors have reinforced this shift. Unlike generation assets, battery storage relies on a blend of revenue streams, including arbitrage, capacity market payments and grid services, which can be harder to forecast and finance. At the same time, developers are facing higher grid costs, uncertain connection dates and more demanding technical requirements. Co-located schemes, particularly those pairing storage with renewable generation or large electricity users such as data centres, may now appear more attractive because they can demonstrate both system value and a clearer commercial need. The result is not necessarily a lack of interest in storage, but a sharper distinction between speculative battery projects and those that are genuinely deliverable under the reformed regime. 

‘Not much activity’ – why does the market feel slower? 

The market feels slower because many projects are now in a period of reassessment rather than active progression. The issue is not necessarily a lack of developer interest or available schemes; instead, the new Gate 2 regime has created a pause while developers work out whether their projects can satisfy the stricter requirements for readiness, strategic alignment and deliverability. Whilst some have switched their attention to on-shore wind, which is less dependent on future high megawatt network capacity and can instead rely on existing unutilised capacity, many are not in a position to do so.    

Although NESO and network operators have been issuing connection offers, there is still uncertainty around the technical and engineering work needed to turn those offers into deliverable projects. This means that developers may have a connection date in principle, but still face delays in confirming costs, network requirements and construction timelines. As a result, investment decisions are being paused while parties wait for greater certainty. 

This uncertainty has been reinforced by regulatory scrutiny. Ofgem has raised concerns that NESO has been unable to meet existing connection dates for a significant proportion (62%) of initially qualifying protected projects. Rather than simply excusing those missed dates, Ofgem’s position has increased pressure on NESO to revisit timetables with developers, which can extend contractual deadlines and slow momentum across the market. 

The move away from the old ‘first come, first served’ queue has also caused some legacy projects to stall. Projects that were once progressing through the queue may now need to prove land rights, planning progress, funding and alignment with Clean Power 2030. Where they cannot do so, they risk being delayed, moved into a less certain position, or removed from the near-term pipeline entirely. 

There are also practical constraints beyond the reform process itself. Shortages of equipment, pressure on supply chains and the need for physical network upgrades mean that even projects with connection offers may not be able to move quickly into construction. The market therefore feels slower because developers are no longer simply securing options and waiting in a queue; they are having to prove viability, renegotiate timelines and absorb wider delivery risks before committing capital. 

The Birketts view 

Overall, the full impact of the connection reform process is unlikely to be clear for several years. However, the direction of travel is already apparent. The market is moving away from a speculative queue-based system and towards a more selective, evidence-led framework that prioritises projects with secured land rights, credible delivery programmes and alignment with Clean Power 2030. In the short term, this has created uncertainty, slower activity and more difficult negotiations around option periods, grid costs and connection dates. In the longer term, however, the reforms should give developers and landowners a clearer basis for assessing which projects are genuinely deliverable. Flexibility will therefore be critical: developers will need to build realistic grid assumptions into their commercial models, while landowners will need to balance stronger option payments against the need to work with credible, well-capitalised partners. Those able to adapt to the new regime, rather than simply wait for the market to return to its previous approach, are likely to be best placed as confidence returns. 

This article was written by Aasiya Malik while on our 2026 Vacation Scheme, under the supervision of Simon Green and Charlotte Strutt.