Post Gate 2 notification options – What next?

Introduction

In April 2025, Ofgem approved reforms proposed by the National Energy System Operator (NESO) to the way projects connect to the electricity network. The reforms aim to remove unviable projects from the queue and prioritise those critical to delivering clean power and wider industrial decarbonisation.

Projects that meet the new requirements for readiness and strategic alignment can secure a confirmed connection date, connection point, and queue position. Most projects have now received confirmation as to whether they have achieved Gate 2 status.

Developers will now be looking ahead to the next steps for their projects. We have set out below some key considerations for developers, both for those projects that have obtained Gate 2 status and those that have not. Our team are experts in energy development and would be delighted to assist or discuss next steps.

Projects awarded Gate 2 status

For those projects which have had Gate 2 status confirmed, there are a number of other legal factors to consider to get ‘shovel ready’.

Land rights and options for lease

One of the requirements prior to submitting a Gate 2 application was to have secured the necessary land rights.  Most land rights were secured by way of an option agreement to lease (“Option”), as opposed to going straight to lease.

As a result, developers will now wish to review their Option to ensure that all necessary consents contained in the Option (including creditor’s consent) have been obtained or are progressing.  In addition, review whether there are any timescales for surveys/investigations that require to be achieved by certain dates, such as planning submissions or any bespoke obligations particular to the site and ensure that those timescales and any associated payments are made timeously.

Some projects may already know that they have secured a connection date which is later than they had hoped, with “phase 2” confirmations meaning a connection date from 2030 onwards. However, other than those with protected 2026 or 2027 connection dates, many successful Gate 2 projects will still be waiting for clarity from their varied connection offer as to their precise connection date. As and when these dates become clear, you will need to assess whether the time periods for exercise of the Option need to be extended by way of negotiation with the landowner.

Given the pressure to secure the land rights prior to the application window closing, it may be that developers accepted terms that they otherwise may have preferred to have considered further, took larger areas of land than needed and/or would like to seek an extension to time periods or other terms of the option agreement now that there is clarity on the grid position.

Equally, it may be decided that with the certainty of a Gate 2 connection offer, it is a good site to move into a portfolio sale and/or move to another group company.   For any discussions surrounding those issues, it would be best to review the terms of the specific Option with our real estate team to check if there are any provisions impacting on such a change (e.g. change of control provisions, prohibition on assignation, etc) and any variations that may need to be entered into to effect the change.

Some projects (especially those with protected 2026 or 2027 connection dates) may only have been waiting for Gate 2 confirmation as the final piece of the puzzle to allow the project to progress to lease.  In such instances, the next step would be to review the Option to see what is required to exercise the option to lease and to co-ordinate service of the option notice.  Developers should contact their legal advisor as early in that process as possible to ensure there is sufficient time for confirmation of plans, schedules of conditions, securing decommissioning obligations and/or timely delivery of any other site-specific requirements.

Grid connection

Whilst confirmation of receiving a Gate 2 offer will be a relief to many, we appreciate that for many projects there will still be some anxiety ahead of receiving the variation offers, which are expected to be received from NESO by no later than 31 January 2026 and (for distribution-connected projects) from DNOs by no later than 31 March 2026. It is critical that, when received, those agreements are reviewed and signed within the prescribed timetable for acceptance. Whilst this will be 90 days for transmission-connected projects, DNOs are expected to set a tighter timeline for acceptance, with 4-5 weeks being the expected period mandated by some. This short period to scrutinise and, where necessary, challenge the terms of the varied connection offers will be an important time. Developers will wish their legal, technical and commercial teams to be lined up to review the terms of those offers and provide advice in order to help them assess continued project viability before those varied Gate 2 offers are accepted.   Likely key areas of focus will be the connection date itself (including the date of any firm connection date where only the non-firm element was protected), any change to the point of connection which has been determined to be necessary (which might necessitate additional land or consent requirements), and any change to the anticipated cost of connection. Another key area of focus will be the relevant milestone dates that are prescribed, noting the much higher level of scrutiny that will be placed on these under the enduring regime.

As part of the acceptance process, developers will need to be ready to post any securities that are required, noting that with a securities freeze throughout much of 2025, the level of securities required to be posted as part of the acceptance process could have jumped significantly compared to current secured amounts. For those projects that have yet to submit a planning application, understanding and being ready for the potential impact of the new ratcheted Progression Commitment Fee which can be introduced under CMP448 – starting at £2,500/MW and ratcheting up to £10,000/MW – will also be important.

Planning

For those developers that have already secured planning permission it is important to check at this point that any planning permission or section 36 consent or development consent order is fit for purpose and that they understand the key milestones and triggers that need to be reached.  A key check will be the date that the permission or consent expires, and to consider whether any applications are necessary to extend this (where possible), or steps required to implement the permission.  Developers should consider whether there is scope to ‘optimise’ the planning consent and put in place a strategy that ensures any necessary amendments are carried out in an efficient manner.

It is also important to also put in place a strategy for the discharge of any pre-commencement planning conditions.  Where those may involve engagement with third parties (e.g. putting in place a decommissioning bond) it is important that engagement is started early, and consideration given to any legal agreements that may be required.  The planning status of your grid connection should also be considered and could be an important point that a funder will want to understand.

For those that have yet to secure planning permission, it is important to realise that the clock is ticking. Applying for and securing planning consent will be subject to strict time periods within the Gate 2 connection offers that are received for these projects, and missing the relevant dates for fulfilling the M1 (planning submitted) and M2 (planning obtained) milestones could result in the Gate 2 connection offer being terminated, with the result that project is removed from the Gate 2 queue. Under the new regime, DNOs are expected to take a much tougher line than under the old regime in enforcing these early-stage milestones in particular. Remaining on top of the deliverables required to apply for and obtain consent will therefore be crucial. For some projects which have already been delayed in submitting planning applications, waiting for the Gate 2 connection offer to land (particularly for distribution connected projects which may take some months to come through) may not be an option if the project is to meet these milestones. Our team of planning experts is on hand to help with this process.

Construction

For those projects that have secured Gate 2 approval, the primary objective from a construction perspective will be to protect the project’s critical path to ensure the connection window is not missed. Some of our clients awaiting Gate 2 decisions have engaged their EPC and O&M contractors early to get a head start on negotiations to avoid delays. Whether or not you are one of the developers fortunate enough to have made progress in the EPC and O&M negotiations pre-Gate 2 status announcement, the priority for you will be to conclude these negotiations in good time.

We appreciate that at this stage, some uncertainties may remain as to when the project’s connection date will be and that for many distribution-connected projects, this uncertainty may remain for a few more months. However, to ensure that construction contract negotiations are successful we recommend that developers engage the market early to ensure that they are able to select and engage your preferred bidder early. Where possible, this initial selection process should be competitive, ideally with indicative responses to EPC and O&M Heads of Terms and/or preliminary mark-ups received from potential bidders. That would allow early filtering of bidders and secure certain commitments from bidders which may otherwise not be possible in an uncompetitive environment. To facilitate expedient negotiation, it will also be important to ensure the parties’ technical teams are fully engaged and are able to progress the various technical aspects of the contracts.

CfD, Capacity Market and Other Agreements

Where the Gate 2 process and the updated connection agreement lead to changes in the anticipated connection date, developers will need to carefully assess the terms of any CfD, Capacity Agreement, PPA or construction agreement that has been entered into, in order to consider the potential impact of such delays. We have experts that are very familiar with these key industry agreements and are well placed to help you manage obligations in order to preserve value and mitigate potential liabilities under them. Similarly we can advise on strategic participation and withdrawal options relating to the forthcoming CfD and Capacity Market auctions where there have been, or are likely to be, changes to connection dates since the date of prequalification. These options and potential consequences will need to be carefully considered.

Project M&A

For those having secured Gate 2 status, your project will likely be more valuable and also of interest to other market participants, thereby opening up M&A opportunities. However, many other projects will be in a similar position, and we are anticipating that lots of projects will be brought to market in a short period of time. This will likely impact market values generally and create a buyer’s market driving increased competition. It will therefore be important to consider the strategy when bringing your project to market, including whether to instruct a corporate finance adviser to help manage the process. We work with a wide range of advisers across the market and can recommend a suitable adviser should that be helpful.

One key point for developers to consider when evaluating a strategy is whether to sell the project(s) on an individual basis, or as part of a portfolio. Selling a portfolio of projects could lead to a wider variety of interested parties and may lead to a more attractive valuation than selling individual projects. Equally, where developers have lots of interest in your project / portfolio, consider whether running an auction process may be beneficial in order to leverage competitive tension. An auction process also opens up the possibility of carrying out vendor due diligence and/or preparing a Certificate of Title pre-sale which, when done well, can speed up the sale process, remove unwanted variables and optimise value. In any event, it will be crucial for developers to get their house in order ahead of any sale process, including making sure all relevant project documentation is to hand (ideally on a well-structured data room) and considering whether a teaser or information memorandum should be prepared for the disposal.

Given our depth and breadth of experience across the energy sector, we are not only well placed to support you with the corporate aspects of the disposal process (including advice regarding structuring considerations), but equally with any vendor-side due diligence and/or Certificates of Title.

Projects awarded Gate 2 status

For those projects that weren’t awarded Gate 2 status, developers will receive a Gate 1 offer or have the option to agree to terminate their connection request.  It is important to consider the next steps available to preserve project value.

Challenge to incorrect NESO determinations

For most projects, failing to secure a Gate 2 offer will be a product of the approved methodologies having been applied correctly by NESO. However, for those projects which have not obtained a Gate 2 offer, prompt action is needed to assess whether any error has been made in relation to such determination. For transmission connected or large-scale embedded projects, challenges should be submitted without delay via NESO’s connections portal together with any supporting documentation. NESO guidance suggests it will give a “clear update” within two working days.

Small or medium-scale embedded projects which submitted initial evidence via a DNO should raise any complaint relating to queue outcome promptly via the DNO’s complaint process. The DNO should then raise any escalations or complex issues with NESO on the project’s behalf. 

If there has been an error, options available will depend on the facts and currently untried processes.  If a mistake in the process is suspected, legal support should be obtained immediately to begin considering your options, including preparing for escalation. Potential escalation routes include (i) reference to arbitration under the CUSC (where possible), (ii) reference to Ofgem for determination and (possibly) judicial review proceedings (including lawfulness, proper process and possibly Human Rights arguments).  Realistically, none of these may provide a route back to obtaining a Gate 2 offer in this window without injunctive relief, which might be considered in rare cases.

Arbitration under the CUSC is likely to be a slow process and the arbitral tribunal may not have the power to force NESO to change its decision in any event.

Ofgem (anticipating a high volume of unsuccessful developers considering challenges) has issued bespoke determination guidance for disputes related to the G2tWQ process.  It requires developers to exhaust available Alternative Dispute Resolution (“ADR”) processes prior to applying to Ofgem.

This may involve producing a ‘deadlock’ letter from NESO or the DNO at the conclusion of the complaints process. Subsequently, Ofgem has stated that it will only accept a request for determination based upon NESO and/or the DNO having failed to follow the TMO4+ process as set out in the CUSC, licence conditions and associated methodologies or having reached an incorrect decision.  Simply disagreeing with NESO’s decision is not enough.  Ofgem will assume that connection terms offered by NESO are reasonable (if the process has been followed).  Judicial review of Ofgem’s decision might be possible but will again focus on the process of the decision making rather than its outcome (unless unlawful or significantly irrational).

In all cases, the factual background of each NESO decision will be critical and will need to be considered on a case-by-case basis. Developers who dispute the Gate 2 decision should seek legal advice as early as possible on the merits of any challenge and available escalation routes.

Our expectation (based on public statements from NESO) is that NESO will wish to work with any developers that are acknowledged to have received an incorrect decision to identify pragmatically what can be done to improve the position for that project in a way which does not upset the established queue. We anticipate the potential solutions available will be driven by the particular facts of each case, and the options are likely to be heavily influenced by technical (constraint) factors as well as the outcome as to whether other projects in the locality allow their Gate 2 offers to lapse.

Whilst the potential remedies available to any projects which have wrongly not been awarded Gate 2 offers are uncertain at this stage, we would nevertheless recommend that where projects have not been treated in accordance with the established Gate 2 methodologies, effort is made to ensure that such inconsistent treatment is recognised by NESO and, where applicable, the relevant DNO, in order to unlock whatever tools are determined to be available to NESO and the relevant DNO to reduce the prejudice suffered by the project.

Grid connection

For projects that have not secured a Gate 2 offer, this does not necessarily mean the end of the road. It may feel like that right now for unsuccessful battery storage projects given the oversubscription of battery storage technologies by a huge 63GW up to 2035, but the grid connection queue will never be static. Some protected projects will fall out of the queue over the coming months – either through declining Gate 2 offers or through failing to meet milestones –  and there is always a possibility of additional capacity added to the 2030 or (more likely) 2035 pots in certain zones based on system requirements.

Whilst Q2 2026 had been suggested as a potential date for the first CMP434 enduring Gate 2 application round, we anticipate that it is likely to be much later in 2026 that this commences. Prior to that, developers who were unsuccessful in the latest Gate 2 process will need to closely follow any adjustments to eligibility or alignment criteria that are introduced along with any changes to the CP30 and CP35 capacities. There could well be lessons learned from the CMP435 round that NESO and Ofgem wish to take into account in the next process. Developers will need to assess, together with their advisors, how best to position their projects in order to maximise the chances of securing a connection offer in the next round, if an assessment is made to go for this.

Land Rights and Options for Lease

If a Gate 1 offer has been received, then the project will need to review the timescales contained in their option agreement to lease (“Option”) and consider whether there is sufficient time remaining in the option period (i.e. the time from the start date of the Option to the date of expiry of the Option) to preserve the Option until a Gate 2 offer may be obtained, noting that, at this stage, it will be difficult to predict when that offer may be received or when the potential connection date might be.    There may be other terms of the Option (e.g. planning milestone dates) that developers will want varied to bring their Option more in line with the current position of the project or if the Option had been entered into some time ago, a developer may want to update some of the terms to more realistically reflect the project.  Our real estate team can review the terms of the specific Option to check if there are any provisions impacting on any proposed change and any variations that may need to be entered into.

It no offer has been received, developers may want to consider seeking a variation of the ‘permitted use’ of the property for another project or even terminate the project’s Option.  It may also be that the project is placed into a portfolio which is sold to a party that is more willing to take these increased development risks than the current owner.  Again, our real estate team would be able to review the Option to confirm if there are any provisions impacting on such a disposal (e.g. change of control provisions, prohibition on assignation, etc) and any variations that may need to be entered into to permit a disposal or transfer of the project’s Option.

Planning

It is important to check at this point what steps need to be taken to preserve a planning permission or section 36 consent or development consent order.  A key check will be the date that any permission or consent expires, and to consider whether any applications are necessary to extend this (where possible), or steps required to implement the permission.  Developers should consider if there are any milestones under the permission or related agreements that require further action at this point.  We regularly advise on the steps required to preserve planning permissions and other consents.

The nature of the enduring Gate 2 rounds is that projects which are the most ready should be connected first. Based on the technology of the project and the capacity remaining in the 2030 or 2035 pots, a decision will need to be made as to whether to continue to advance planning applications, with an eye on being as far advanced as possible prior to the next window, to maximise chances of receiving a Gate 2 offer in the next round.

CfD, Capacity Market and Other Agreements

Whilst there are anticipated to be a low number of cases where projects which have already secured CfD or Capacity Market Agreements fail to secure a Gate 2 offer, any projects that have already prequalified for the upcoming CfD and Capacity Market rounds will need to consider their options with regard to these forthcoming processes. Our experts are available to help you consider your options.  Similarly, in those instances where projects have already entered into a PPA or construction agreements, managing contractual commitments under those agreements will be important.

Project M&A

If limited options remain after having explored all potential viable alternatives (including private wire and/or behind the meter options), developers should consider whether any of the project rights may still be valuable. Depending on the stage of the project, there may be certain land rights which can be disposed of separately in order to extract value from the project. Whilst a disposal of the SPV is likely to be preferred, consider whether an asset sale may be of greater interest to other market participants and therefore result in higher value extraction.

Next steps

Please do not hesitate to get in touch with one of our team if you would like to discuss further.