Securities Explained – Generation & Battery Storage

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Securities Explained – Generation & Battery Storage

Navigating Financial Liabilities in Energy Transmission Projects

The world’s transition towards sustainable energy sources has brought about a surge in generation and energy storage projects. These projects, vital for securing a greener future, often require transmission works to seamlessly integrate them into the existing energy infrastructure. While these projects promise cleaner energy and a brighter future, it’s crucial to understand the financial intricacies that accompany them. In this post, we delve into the financial liabilities associated with transmission works and how they impact the landscape of energy projects.

Understanding the Landscape

When a generation or energy storage project necessitates transmission works, associated financial commitments and liabilities come into play. These commitments are divided into two categories: Attributable Liability (Fixed or Actual) and Wider Charge. The cumulative value of these commitments constitutes the Cancellation Charge in the event of project termination. However, it’s important to note that demand projects follow a distinct approach, which we’ll explore in a separate section.

Decoding Attributable Liabilities

Attributable Liabilities represent the proportionate expenditure undertaken by the Transmission Owner (TO) on the Attributable Works These works are generally what is required to connect a project to the main transmission system. Here, two options exist: Actual or Fixed Attributable Liabilities.

Actual Attributable Liability – This mirrors the real-time spending of the TO, periodically revised to align with expenditures.
Fixed Attributable Liability – In contrast, this liability increases in a staged profile, remaining unaltered by revisions. While the final value upon project energisation remains constant, Fixed Liabilities demand a larger capital infusion during the project’s early stages, unlike Actual Liabilities.

Unpacking Wider Works

Wider Works relate to works further afield from the point of connection that are required to facilitate the connection. The Wider Works Charge, expressed per megawatt (MW), reflects the wider spend in the designated transmission zone. This charge is scaled until the connection date and undergoes annual revision by National Grid Electricity System Operator (NGESO).

Timelines and Triggers

Attributable Liabilities are activated in line with the TO’s spend, whereas the Wider Charge comes into effect from the Trigger Date. This Trigger Date is the beginning of the full Financial Year, 3 years out from energisation of the project. NGESO provides S-Curve statements, which forecasts these payments, which are then updated bi-annually.

Securing Commitments

Security measures are established by NGESO to safeguard these financial liabilities. Before the Trigger Date is passed, all security payments are 100% of the indicated value as per the S-Curve statements. Subsequently, after the Trigger Date has passed, the required percentage decreases in line with the table below. This reduction varies based on the connection type and the planning permission status of the project.

Trigger Status	Directly Connected – No Planning	Directly Connected – Planning Secured	Embedded Generation – No Planning	Embedded Generation – Planning Secured
Pre-Trigger Date	100%	100%	100%	100%
Post-Trigger Date	42%	10%	45%	26%

Below is an example graph of what this could look like, with the red line indicating required securities account balance.

In conclusion, the financial landscape surrounding energy transmission projects is intricate and multifaceted. The interplay of Attributable Liabilities, Wider Charge, and security measures orchestrates a delicate balance between encouraging sustainable energy growth and managing financial risks. As our global pursuit of cleaner energy sources continues, comprehending these financial nuances is pivotal for stakeholders navigating the promising yet complex realm of energy project development.
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