Teal blue graphic

Grid sharing arrangements - key considerations

Grid sharing arrangements can arise in a number of situations. For example, most building-wired rooftop solar projects and other private wire PPA arrangements are likely to have a grid sharing element.

We have also been involved in a number of projects where multiple solar parks have used a single grid connection. This has included both RO supported projects and schemes involving community organisations which are able to benefit from the relevant FIT rules allowing "5 + 5" installations sharing a single grid connection.

Looking forward, we anticipate that developers may seek to co-locate different technologies at the same site, possibly combined with storage. Other storage projects are likely to be developed in which batteries are located "behind the meter" for customers with large electricity demands. Grid sharing issues can then arise, depending on the legal structure and whether or not the different generation/storage technologies are operated by different project companies.

The basic concept in grid sharing arrangements is that one party will "own" a particular grid connection that is used by one or more other parties. "Ownership" is likely to mean both ownership and operation of certain customer side infrastructure which connects to the relevant DNO equipment, as well as acting as the "customer" counterparty to the grid connection agreement with the DNO.

The other party or parties will then be dependent on the "owning" party maintaining the relevant grid connection for their benefit, so that they are able to connect into the relevant infrastructure and import and export electricity through it for their own needs. 

This will include the owning party maintaining the relevant connection infrastructure, complying with obligations under the DNO grid connection agreement and enforcing rights under that agreement. If the owning party fails to do these things, whether as a result of insolvency or otherwise, there is a theoretical risk of the grid connection being de-energised. The DNO could even take steps to terminate the grid connection agreement.

Grid sharing – key considerations

Structure

On most of the private wire PPA projects we have been involved with, the customer is the party which has "owned" the grid connection. However, on some projects, the developer has been able to agree a more favourable structure under which a new grid connection is owned by the project company and shared with the customer for its own grid import purposes. For the customer's comfort, the relevant contractual arrangements have generally included terms describing how the customer would be "switched" back to its old connection on termination of the PPA.

An alternative structure, which we have seen used on projects where two solar parks have shared a single grid connection, is for a third party "grid-co" to hold the grid connection for the benefit of the two solar park project companies. The relevant "grid-co" could potentially be a special purpose vehicle jointly owned by the two project companies.

Core obligations 

Appropriate obligations should be imposed on the "owning" party around its maintenance of the grid connection for the benefit of the other user party or parties.

Equally, each user party should expect to agree broadly reciprocal obligations in relation to its own activities so as not to cause the owning party to be put in breach of the relevant DNO connection agreement.

Step in rights

When looking at what rights each party should have in order to mitigate risks arising from a temporary loss (de-energisation) of the shared connection, it will be important to consider the relative financial standing of each of the parties to the grid sharing arrangements and the availability of insurance cover.

In many cases it may be appropriate for parties to be given step-in rights as a practical remedy for resolving issues which have caused or risk causing a loss of the grid connection. These might extend to not only carrying out certain remedial repair or maintenance work on relevant infrastructure, but also to the temporary disconnection of particular equipment which is faulty or damaged.

Termination 

Developers will need to consider what would happen on any termination of the grid sharing arrangements eg as a result of a material breach or insolvency of one of the parties. The appropriate procedure in some cases may be for the defaulting party to agree to do whatever is necessary to allow the remaining party or parties to take over use of the grid connection to the exclusion of the defaulting party. 

Depending on the structure of the arrangements, this may require not only that the defaulting party's own equipment be disconnected permanently from the shared connection, but that the defaulting party transfer ownership of particular connection infrastructure and/or seek to transfer the grid connection agreement.

Conclusion

As noted in our recent article, the need for renewable project developers to find additional electricity revenues in a post-subsidy world will likely drive an uptake in interest in private wire PPA structures.

At the same time, we are likely to see more and more projects come forward in which battery or other storage technologies are deployed "behind the meter".
In both cases, one of the important areas that will need consideration is the basis on which relevant grid connections are shared between different parties.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Insights & events View all