Connect: Ofgem opens the door to full self-build on the transmission grid

Ofgem has published a consultation proposing to let developers, generators, storage operators and demand customers build their own connection assets all the way to the existing transmission system, rather than relying on a Transmission Owner to do it, and then hand those assets over once built. The current rule confining this option to sites within 2km of the grid, long seen as the main constraint on self-build, would be scrapped. Responses are due by 13 November 2026.

What has been proposed

Self-build and transfer (also called contestable build, or contestability) lets a connecting customer construct the assets linking its site to the transmission network itself, then transfer ownership to the relevant Transmission Owner (National Grid Electricity Transmission, Scottish Hydro Electric Transmission or SP Energy Networks) under an Adoption Agreement. Today that option exists only where the site sits within 2km of the existing network, or the assets are not potentially shareable. Ofgem's proposal removes the distance cap: any sole-use asset between the connection point and the existing transmission system, sole use being assessed at the point the Adoption Agreement is signed, would become eligible for self-build and transfer, however far from the network the site sits.

The policy backdrop

The proposal sits under the "Connect" pillar of Ofgem's wider demand connections reform programme, alongside "Curate" (entry and membership criteria for the connections queue) and "Plan" (government-led prioritisation of strategic projects, including data centres). Ofgem is using the new, time-limited modification powers in the Planning and Infrastructure Act 2025 to push through an integrated package of changes across the transmission licence, the Connections and Use of System Code and the System Operator and Transmission Code in one go, alongside draft guidance on a new engineering approval framework (Pre-Approval of Solutions by Engineering, or "PASE") and a Standard Adoption Agreement.

Ofgem frames the change as a response to clear market demand: 36 demand projects already in NESO's connections queue, and a number of generation and storage developers, have expressed interest in self-build, a conclusion Ofgem says is reinforced by the 25 organisations that backed greater self-build and transfer in response to its earlier Call for Input. The growth of AI-driven data centre demand, often co-located with generation and storage and frequently structured so that a single entity holds the bilateral connection agreement with NESO while each facility sits in a separate legal entity (the "GridCo model"), is cited as a specific driver.

Benefits, and the price tag on inaction

Ofgem's own modelling, built on low, medium and high impact scenarios, puts the potential saving to connecting customers at between £25 million and £64 million, assuming self-built assets are treated as connection assets for charging purposes, with connection dates coming forward by one to two years in the medium and high impact scenarios. Existing consumers could also benefit: Ofgem estimates a reduction in socialised network costs of between £12.5 million and £1.3 billion a year, depending on uptake and how many self-built assets end up classified as shared "infrastructure" assets rather than sole-use "connection" assets. Ofgem is candid that these figures are illustrative pending better data from projects already in the queue.

The guardrails

Wider self-build inevitably raises the question of who absorbs the risk if a customer-built asset turns out to be poorly designed, substandard or late, and whether other billpayers end up picking up the tab. Ofgem's answer has several moving parts.

Design approval through PASE. Connecting customers using one of Ofgem's pre-approved "primary" engineering options would need only the Transmission Owner's sign-off. Anything outside that menu, described as a "variant" or an innovative solution, would need Ofgem approval too, on top of the Transmission Owner's.

Technical standards to be published upfront. Self-built assets must meet the Transmission Owner's technical standards, since the Transmission Owner inherits long-term responsibility for them once transferred. Transmission owners would be required to publish those standards, with a new obligation to facilitate competition in connections (mirroring an existing distribution-licence obligation) intended to keep the standards reasonable rather than a backdoor barrier to entry.

A standardised five-year defect notification period. The connecting customer remains on the hook for fixing defects caused by its own build for five years after adoption, a period Ofgem has chosen to standardise (current market practice ranges from three to five years). Ofgem is still consulting on what happens to uninsurable defects that surface after that window closes.

A Standard Adoption Agreement. Transmission owners would be required to draft, and Ofgem to approve, a template Adoption Agreement setting out common terms, populated with project-specific detail but otherwise consistent across projects and published in advance so customers know what they are signing up to.

Independent dispute resolution. Scope disputes, design rejections and adoption refusals would go to a suitably qualified independent third party, whose decision would bind the Transmission Owner. Developers have reportedly pushed for a pre-approved panel of acceptable third parties, on which Ofgem is now consulting.

Who pays, and who bears what risk

Cost allocation follows the existing Connections and Use of System Code distinction between "connection" assets (paid for by the customer) and "infrastructure" assets (recovered through local and, where there is a shortfall, socialised charges). Because the new scope is limited to sole-use assets, Ofgem expects most self-built assets to remain connection assets, paid for by the customer, who can choose to transfer them to the Transmission Owner for free or negotiate a price that then sets the Gross Asset Value used in the connection charge calculation. 

Where a Transmission Owner concludes under the Code that some self-built assets are, in substance, shared infrastructure likely to benefit future users, the Transmission Owner would instead pay the customer for them; above a £40 million threshold, that price would need to reflect the economically efficient cost as determined through Ofgem's Load Reopener process, with Ofgem carrying out both an eligibility and a project assessment.

On risk allocation more broadly, the connecting customer bears the consequences of failing to secure consents, of cost overruns against the agreed price, of defects within the five-year window, and of its bilateral connection agreement being terminated before the assets are needed. The Transmission Owner bears the risk of an independent assessor overturning its refusal to adopt, of defects surfacing after the five-year window, and, more unusually, of a future customer wanting to connect nearby in a way that undermines the original sole-use basis for the assets. Ofgem's provisional view is that Transmission owners should not have a unilateral right to step in and take over the build in that last scenario, preferring to rely on the gated approval process and PASE to reduce the likelihood of it arising at all.

What to watch

Three factors will determine whether this delivers what it promises: 

1. The £40 million threshold and the PASE primary/variant split need to strike the right balance between speed for standard projects and scrutiny for larger or novel ones; Ofgem is asking directly whether PASE primary options should bypass Ofgem approval altogether.
2. Transmission owners' technical standards, once published, need to be genuinely reasonable rather than become a de facto barrier to self-build, which is precisely what the new competition-facilitation obligation is meant to prevent.
3. How this interacts with Ofgem's parallel work on an independent Transmission Owner licence and the Competitively Appointed Transmission Owner regime, both of which offer self-build customers routes to something other than transfer back to the incumbent Transmission Owner, and which Ofgem says it is still working through.

Next steps and response deadline

Responses are due by 13 November 2026, with Ofgem aiming to publish responses in January 2027 and a decision or policy statement in the first quarter of 2027. Because the changes are being made under the Planning and Infrastructure Act 2025, no standstill period applies once a decision is made, so the new scope could take effect immediately on implementation. Developers and transmission owners with a live or prospective connection should consider now whether, and on what terms, they would want to elect into the new scope.