Ofgem consults on enabling greater self-build of transmission connections

Background

On 7 October 2026, Ofgem published its consultation Connect: self-build and transfer ("Consultation"), which sets out proposals to widen the scope of self-build and transfer of transmission-level assets. Responses are due by 13 November 2026. 

The proposals are made under the “Connect” pillar of Ofgem's demand connections reform programme. That programme also has a “Curate” pillar, covering entry and membership criteria, and a “Plan” pillar, covering government-led prioritisation of strategic projects. The demand programme drives the work, but the proposals are meant to support all onshore transmission customers: demand, generation and storage. The Consultation is accompanied by:

• draft changes to the standard transmission licence conditions, the Connection and Use of System Code (CUSC) and the System Operator – Transmission Owner Code (STC);
• draft guidance on Pre-Approval of Solutions by Engineering (PASE); and
• draft guidance on the Standard Adoption Agreement. 

Ofgem proposes to implement the package using its time-limited powers under the Planning and Infrastructure Act 2025. It says this route allows a coordinated, integrated reform across several regulatory documents, building on earlier industry code modification proposals.

Expanded Scope

At present, self-build and transfer (i.e. contestable works) is only available in limited cases at transmission level. For example, the customer's site must be within 2km of the existing transmission system and the assets must not be potentially shareable. Ofgem says this has kept the option out of reach for most connecting customers. 

Ofgem proposes to let connecting customers self-build and transfer all assets from the connection point to the existing transmission system, provided the assets are “sole use” when the Adoption Agreement is entered into. Examples include overhead lines and project substations. Sole use expressly covers the "GridCo model", where one entity holds the bilateral connection agreement with National Energy System Operator Limited (NESO) and the individual data centre, generation and storage assets are owned by separate entities. Centralised Strategic Network Plan works and other enabling or wider reinforcement works remain out of scope. The Transmission Owner (TO) will still decide where the self-built assets connect to the existing system. 

Ofgem cites evidence of market interest: NESO’s Demand Information Request Notice suggests that 36 demand projects in the queue are interested in self-build and transfer, while 25 organisations supported wider self-build in responses to Ofgem’s Call for Input. Stakeholders have reported potential cost savings of around 20% and time savings of one to two years where no reinforcement is needed. These figures are stakeholder estimates rather than findings established by Ofgem’s impact assessment. Ofgem also accepts that faster delivery of contestable assets will not bring forward the connection date for many projects because that date often depends on enabling and wider works outside the scope of self-build.

Technical Standards

The self-built assets must be built to the TO's technical standards. TOs will be required to publish those standards, and a new general licence obligation to facilitate competition in connections is intended to keep them reasonable. 

Design will follow the PASE framework:

• PASE Primary Options (pre-approved solutions) do not need Ofgem approval.
• PASE Variant Options and Non-PASE Aligned Options need Ofgem approval before the final design is agreed with the TO. The process begins with an Eligibility Letter. Ofgem will then determine the evidence required for the Needs Case Assessment and, following that assessment, whether a Project Assessment is required.
• Ofgem approval as a condition: where approval is needed, it will be a condition of the Adoption Agreement that cannot be removed.
• Revised designs: if Ofgem rejects a design, it will explain why, and the customer may submit one revised design within three months. 

The PASE guidance covers connection assets and infrastructure assets worth less than £40m. Infrastructure assets worth £40m or more go through the RIIO-3 Load Reopener process instead. If a design is wrongly treated as a PASE Primary Option, Ofgem may take proportionate enforcement action. The draft PASE guidance states that such action may include termination of the Bilateral Connection Agreement, although the package does not yet explain the legal and contractual route by which that consequence would be implemented.

Standard Adoption Agreement

TOs will have a new licence obligation to produce and publish a Standard Adoption Agreement. Ofgem proposes to approve each TO’s standard form before publication. The agreement would then be populated with project-specific information. The draft licence changes nevertheless contemplate that the parties may agree changes to the standard terms, provided those changes do not adversely affect the wider consumer base.

Ofgem proposes a standard five-year defect notification period. During that period the connecting customer must fix defects caused by its own actions or its contractor's. The customer must also transfer its equipment supplier warranties to the TO. Ofgem is also asking whether the customer should remain liable for uninsurable defects that arise after the five years. 

The proposed risk allocation between customer and TO is:

• Connecting customer:
  • failure to obtain consents;
  • justified refusal by the TO to adopt the assets;
  • cost overruns above the agreed price;
  • defects within the five-year period; and
  • termination of the bilateral connection agreement. On termination, the Adoption Agreement also ends and the customer loses any money it has spent.
     
• TO:
  • an independent assessor overturning its refusal to adopt;
  • defects found after the five-year period; and
  • assets ceasing to be sole use after the Adoption Agreement is signed. 

TOs had asked for a right to step in and take over the build where a new customer wants to share the assets. Ofgem's initial view is that this right is not needed. 

Cost Recovery

Because the assets will be sole use, Ofgem expects them normally to be classed as connection assets. The customer may then either transfer the assets free of charge or negotiate a price, and that price becomes the Gross Asset Value used to calculate connection charges. 

Where the TO classes some assets as infrastructure assets under section 14 of the CUSC, the TO will pay the customer for them. The price then depends on value:

• Below £40m: the customer must competitively tender or otherwise show value for money; or
• £40m or more: the price is the efficient cost determined by Ofgem through the RIIO-3 Load Reopener process. 

TOs would recover what they pay through use-it-or-lose-it allowances or the Load Reopener, not through the connections volume driver. The price should reflect competitively tendered asset and directly associated labour costs only, without risk allowances or project management fees. The RIIO-ET3 Connections Financial Output Delivery Incentive (ODI-F) would apply only to the TO’s non-contestable works, so the TO would not be penalised for delay attributable to the customer’s delivery of contestable works.

Procedure

NESO will ask applicants whether they want to self-build. The TO will then provide a high-level design and cost estimate, and the parties will agree the contestable scope and enter into an Adoption Agreement. Before applications are made, TOs must publish:

• guidance on the process, with timeframes and worked financial examples;
• clear information on which works are and are not contestable;
• their technical standards and handover requirements; and
• the approved Standard Adoption Agreement. 

The TO must approve the customer's designs unless it can show they do not meet its technical standards. It must adopt the assets unless it can show the Adoption Agreement requirements have not been met. Certain disputes will go to a suitably qualified independent third party, whose decision is final and binding on the TO if they relate to:

• whether a proposal is within scope;
• rejection of the initial or detailed design; or
• a refusal to adopt the assets .

Developers would like a pre-approved panel of such third parties, and Ofgem is asking who should be on it. Standard contractual remedies will apply to all other matters. 

Licence and Code Changes

The draft licence changes would require TOs to facilitate competition in connections, publish a document governing their Self-Build and Transfer Arrangements, include a Standard Adoption Agreement and charging examples, and avoid discrimination in relation to self-build. The consultation and draft Adoption Agreement guidance say that Ofgem would approve each Standard Adoption Agreement, although that approval mechanism is not clearly expressed in draft Condition D19. A new CUSC Section 20 would set out the process for self-build and transfer, covering the Adoption Agreement, TO technical standards, PASE and the defect notification period. Amendments to the STC would govern coordination between NESO and TOs on self-build applications and TO Construction Offers.

Comment

This is a significant reform. Contestability at transmission level has long been restricted by the 2km limit and the "potentially shareable" test, which has often ruled it out for projects some distance from the network. Removing those limits, and recognising the GridCo model, should particularly benefit data centre developers and co-located generation and storage projects. 

The package also contains safeguards for TOs and consumers through allocation of responsibility and risk onto developers in respect of:

• a five-year defect period, with possible liability for uninsurable defects after it;
• the risk of cost overruns and of losing sunk costs if the connection agreement is terminated; and
• Ofgem scrutiny of non-PASE designs, with possible enforcement action. 

Developers and their funders will want to examine whether this allocation of risk is bankable. Much will depend on the final Standard Adoption Agreement, the extent to which construction, defect and warranty risks can be passed through to the supply chain, and whether the interface between the Adoption Agreement, Construction Agreement and Bilateral Connection Agreement gives lenders adequate protection against delay, non-adoption and termination. The proposed payment only on adoption may also create a material construction-period funding requirement.

The practical benefits are also likely to be limited where connection dates depend on wider reinforcement works, which remain with the TO.

Stakeholders have until 13 November 2026 to respond to the Consultation. Ofgem plans to publish responses in January 2027 and its decision in Q1 2027. No standstill period is required under the Planning and Infrastructure Act 2025, so the changes would take effect immediately once decided. Ofgem is working with NESO and TOs on fast implementation, including, where appropriate, letting existing customers opt into the new scope. TOs would then need to draft and publish the Standard Adoption Agreement, publish their technical standards and update their charging statements, guidance and processes.