What you (the owner) know today
Accepting your Gate 2 offer signs you up to the fee, if Ofgem approves it. Under the connection rules (CUSC Section 15), you already put up security for your cancellation charge: 42% of the charge until your key consents, such as planning permission, are in place, which you expect by October 2028, then 10%. Until then, your own security is higher than the fee could be, so the fee adds nothing. After that, it falls to £2,611 per MW, rising to £5,221 by April 2030, while the fee would be £10,000 to £25,000. So from October 2028 until the battery connects, the fee, not your own security, would decide how much you put up.
Connection dates in the queue often slip, so you expect your battery to connect late: by about a year and a half on average, and possibly by more than five years (see how often dates move on QueueWatch). By the build decision, 18 months before the connection date expected then (April 2029 if the 31 October 2030 date holds), you’ll know whether the connection date has slipped, what the connection works still cost and the market outlook. A late slip in the connection date and how strong the market turns out come only after the battery is ordered.
Still waiting for your Gate 2 offer? Worked example 1 works through that position.
- The projectA 200 MW battery with four hours of storage (800 MWh) at 400 kV, with a Gate 2 offer to connect on 31 October 2030.
- Your choice nowAccept the offer for all 200 MW, accept fewer, or decline it. Accepting fewer MW than offered costs a revised-offer fee of £35,925. Declining is worth nothing.
- Walking awayDeclining now for nothing, or pulling out later and paying the cancellation charge.
- SellingA buyer pays you and takes over the offer, its security and the fee.
- The commitment feeIf Ofgem approves it and NESO switches it on: £3,000 per MW from October 2027, £5,000 from April 2028, then £5,000 more at each six-monthly review to £25,000. It sets a minimum on the security you put up, until the battery connects.
Not as a payment. The commitment fee sets a minimum on the security you put up for your connection. There is one security: the larger of your project’s own security and the fee. You get it back when the battery connects. If you pull out, you pay the cancellation charge, which for this project is always higher than the fee, so pulling out costs the same with the fee or without it. So the fee’s only cost is the money tied up in the extra security until it comes back: your 8% a year cost of money, plus the bank’s charge of 2% a year on the security.
- Your securityYour cancellation charge is £1,000 per MW until April 2027, then £13,053, rising by the same each April to £52,212 in April 2030. You put up all of it as security until April 2027, then 42% until your key consents are in place, which you expect by October 2028, then 10%.
- The build decision18 months before the connection date expected at the time: April 2029 if the 31 October 2030 date holds. You either build the battery, or drop the project and pay the cancellation charge.
- What it earnsTrading income, plus Capacity Market payments from the connection. The trading income is 1.6 times a published revenue index for two-hour batteries: a four-hour battery earns more per MW, and as no four-hour figure is published, 1.6 is our estimate (Step 5 shows how low it could go before walking away wins).
- CostsBuilding the battery costs £596,000 per MW. Keeping the project costs £2,000 per MW a year for land and advisers, and the bank charges 2% a year on the security you put up.
- Cost of money (WACC)8% a year in real terms (above inflation).
- Your risk appetiteA quarter of the project’s value is set by its worst 1 in 20 outcomes (a weight of 0.25) and the rest by the average (Step 2 shows how).
How the answers are worked out
QueueQuant’s engine answers your questions in five steps. Step 1 plays out how the fee could move, and what it does to your security. Steps 2 and 3 work out what the project is worth to you and how many MW to keep, now and at each of the fee’s reviews. Step 4 works out what buyers would bid, and Step 5 how far each assumption would have to move to change the answer.
Watch the fee climb
This step plays out the fee at its six-monthly reviews: Ofgem’s decision, NESO switching it on, and the fee climbing from £3,000 towards £25,000 per MW. The chart shows the fee beside the security your project puts up anyway. The fee costs you something only where it rises above that security, shaded on the chart, because you then put up the difference until the battery connects.
Play out the reviews once to follow one path the fee could take, or 1,000 times to see the chances at work. You can also set when your key consents are in place, and when the battery connects.
What the fee costs you for all 200 MW, in today’s money, if the battery connects on time, in October 2030: the money tied up in the extra security until it comes back. The average covers every path the fee could take, so playing a path doesn’t change it.
These costs are for one connection date. Across all the engine’s futures, where the battery usually connects late and in some is never built, the fee takes £0.42m off the project’s worth as it may come, and £0.71m as proposed.
What to notice. Until your key consents are in place, your own security is above the fee whatever it does, so the fee costs nothing. Once they’re in place, your own security falls to 10% of the cancellation charge, and the fee sets your security instead, until the battery connects. So each year the battery connects late adds about £0.27m to what the fee costs if it comes in as proposed. Where your battery is in Great Britain (its charging zone) barely matters: even where the cancellation charge is lowest, the fee cuts the project’s worth by the same, £0.42m as it may come and £0.71m as proposed.
In a study for your project, these chances are your own judgement, which we help you set. Here, there’s an 80% chance that Ofgem approves the fee. Once it’s approved, there’s a 90% chance at each review that NESO switches it on. Once it’s on, at each review there’s an 80% chance that it climbs a step and a 5% chance that it switches off for good; otherwise it stays where it is. The same chances apply at every review until the battery connects.
Step 5 shows that accepting all 200 MW stays the best choice whatever the chance that Ofgem approves the fee, or that it climbs at each review, from 0% to 100%, and even if the fee comes in as proposed.
How the engine values the project
The engine values accepting different amounts, from none to all 200 MW, and finds all 200 MW worth the most to you. This step shows how it works out what the project is worth, for 200 MW as an example, and Step 3 shows whether you should give up any MW later, as the fee changes at its six-monthly reviews.
Nothing is built yet, so what you hold is the right to build a battery at this connection, and the choices that come with it, such as whether to build it or drop the project at the build decision. The engine plays out 8,000 possible futures, with the fee and without it, makes your choices in each using only what you’d know at the time, and from the 8,000 results works out what the project is worth to you.
What happens after you accept your offer, and when things become known
Accepting
- Known
- The offer: 200 MW, connecting on 31 October 2030.
- Decided
- How many of the 200 MW to accept (in this example, all 200).
- Money
- The first security, £1,000 per MW. Accepting fewer MW than offered costs the revised-offer fee.
The commitment fee’s reviews
- Known
- Ofgem’s decision, then whether the fee is on, and its level.
- Decided
- Whether to give up any MW (Step 3).
- Money
- The security, the larger of your own and the commitment fee, with the bank’s charge on it, and the costs of keeping the project.
The build decision
- Known
- Whether the connection date has slipped, the cost of the connection works still to pay, and the market outlook.
- Decided
- Build, 4 hoursDrop it
- Money
- The battery is paid for in stages from the order. Dropping the project pays the cancellation charge from the security.
Connection
- Known
- A late slip in the connection date, which can leave the battery built but idle, how strong the market turns out, and the Capacity Market price.
- Money
- The security comes back.
Operation
- Money
- Trading income and Capacity Market payments, less running costs, network charges, a top-up to keep the battery’s capacity as it ages, and decommissioning.
For each of the 200 ways the connection could go, the engine decides once whether to build or drop the project, and keeps that decision in all 40 market futures, because when you decide, you don’t yet know how the market will turn out.
The 8,000 futures
The engine plays out 200 ways the connection could go, each with its own connection date, cost of connection works and curtailment. Each is played against the same 40 market futures, from the weakest market to the strongest, which makes 8,000 futures in all. In the engine’s 8,000 futures, the battery connects late in almost every one: 1.6 years on average, and up to five and a half years. In the chart, each row is one way the connection could go, and each of its 40 cells is one market future. A cell’s colour shows what the project is worth to you in that future, in today’s money.
Where the engine drops the project, you lose the same amount whatever the market does, mainly the cancellation charge, so the whole row is one colour. Use the three fee buttons to see how the values change with the fee. Click a row, or use “Step through the rows”, to see what you’d know at the build decision on that row, and why the engine chose to build or drop.
The engine builds at 155 of the 200 outcomes and drops at 45. Switch to “If it comes in as proposed” to see two rows change from build to drop.
The thin band on the left of each row shows the engine’s choice for that outcome: teal for build, brown for drop. An orange mark on the right edge shows the 10 worst rows, the worst 1 in 20, and a small black square on the left edge marks the rows where the engine drops the project only if the fee comes in as proposed.
Connection outcome 113 of 200, row 1 in this order
What you’d know at the build decision, in April 2029, 18 months before the connection date expected at the time
- Connection date
- Oct 2030 (on time)
- Connection works still to pay
- 17% below the estimate
- Market outlook
- Strong
The engine’s choice and the row’s value, with and without the fee
| The fee | Choice | Value |
|---|---|---|
| Without the fee | Build | £42.40m |
| As it may come | Build | £42.12m |
| As proposed | Build | £41.85m |
Engine’s choice: build the battery. Building is worth more here than paying the cancellation charge.
Its 40 market futures: each dot is one future, the 2 worst in amber
From 8,000 results to one value
Your risk appetite sets two weights: in this example, 0.25 on the worst results, your weight on the downside, and 0.75 on the average (try another weight in Step 5). The engine first turns each row’s 40 results into one value: 0.75 times their average, plus 0.25 times the average of the 2 worst, the worst 1 in 20. On each row, it builds or drops, whichever gives the higher value.
It then combines the 200 row values the same way: 0.75 times their average, plus 0.25 times the average of the 10 worst, the worst 1 in 20. The result is what the project is worth to you, in today’s money, using your 8% a year cost of money.
Each dot is one connection outcome: teal where you build, brown where you drop. The 10 worst, the worst 1 in 20, are ringed in amber. The larger, outlined dot is the outcome whose details are open above, under “Step through the rows”. Click any dot to open its details in that panel.
With the fee as it may come, these 8,000 futures give £6.96m, £0.05m more than the £6.91m at the top of the page. In this step, the engine fixes its whole plan now and simply averages the paths the fee could take. The £6.91m comes from Step 3, which does two things differently. It lets the engine change its plan at each of the fee’s reviews, which adds a little. It also gives extra weight to the paths where the fee costs most, as this step does to the worst futures, which takes off a little more.
What to notice. The later the battery connects, the more the fee costs, because it keeps your security up until then. Where the battery is built, the fee as proposed cuts a row’s value by £0.66m on average where the battery connects less than a year late, and by £1.18m where it connects two years or more late. On the two rows marked with a black square, both connecting more than a year late, the fee as proposed makes building no longer worth it, so the engine drops the project, and dropping comes out ahead by £12k on one row and £256k on the other.
Why 200 connection outcomes and 40 market futures? With these numbers, the worst 1 in 20 is a whole number of each: the 10 worst of the 200 connection outcomes and the 2 worst of the 40 market futures. Using more market futures barely changes the value. How precise it is depends on the number of connection outcomes.
The 200 connection outcomes aren’t picked at random. The range of each uncertain quantity, such as how late the connection is or what the connection works cost, is split into 200 slices of equal chance, and each slice is used once, so the outcomes cover the whole range evenly.
The 40 market futures are chosen on purpose too. They run evenly from the weakest market to the strongest, so the 2 weakest are exactly the worst 1 in 20. Other uncertainties that come with each market future, such as an extra delay after the battery is ordered, still cover their full range, but they’re arranged so that a weak market and a long delay don’t land on the same future by luck.
Worked example 1 shows how both are chosen, with 10 connection outcomes and 10 market futures you can shuffle.
This step worked out the value of one choice: accepting all 200 MW now. The engine values every other choice the same way, on the same 8,000 futures: keeping fewer MW, at each six-monthly review, whatever the fee has done by then. Because the futures are the same, the differences between the values come from the fee and the MW you keep, not from luck. Step 3 compares these values to find how many MW to keep at each review.
Decide how many MW to keep at each review
This step answers two questions: how many MW should you accept now, and should you give up any later, as the fee changes at its six-monthly reviews?
The tree below has a column for each review, from now to April 2029, and a row for each place the fee could be: not yet decided, no fee, approved but not yet on, or on at £3,000 to £15,000 per MW. Each box shows the chance of the fee being there at that review. At each box, the engine values keeping 200, 150, 100 or 50 MW, the way Step 2 valued accepting all 200, and compares them. It can also keep all 200 MW for now and decide again at the next review, once it sees what the fee does. Click any box to see the values behind its choice. In every box the engine keeps all 200 MW, because each MW is worth far more to you than the fee costs on it.
Scroll sideways to see every review.
What to notice. The six boxes with a teal border follow the fee as proposed: Ofgem approves it in April 2027, NESO switches it on in October 2027, and it climbs at every review, to £15,000 per MW by April 2029. Even on that path, every MW is worth keeping: giving up 50 MW in April 2029 would lose £3.29m, valued at that date.
What each MW is worth
The chart shows what the project is worth to you now if you accept fewer MW, every 25 MW from none to all 200, without the commitment fee and if it comes in as proposed. Accepting fewer than 200 MW means paying a revised-offer fee of £35,925, which the chart allows for.
Without the commitment fee, each MW from 150 to 200 adds about £40k to the project’s worth. The commitment fee as proposed takes about £3.6k of that, leaving £36k. So giving up a MW would lose about £40k of worth to save £3.6k of commitment fee.
See what buyers would bid
This step works out what buyers would pay for the project, with the commitment fee and without it. The engine prices it for two kinds of buyer, a typical one and a cautious one, to show how much the price depends on who’s buying.
A typical buyer sees the project as you do: the same 8% a year cost of money, the same weight of 0.25 on the downside, and the same chances for the fee. So it would bid what the project is worth to you.
Selling costs you 1.5% of the price plus £50,000, for running the sale, such as advisers, lawyers and due diligence, so a bid has to reach £7.07m to beat keeping the project, which is worth £6.91m to you. A typical buyer would bid only £6.91m, so selling pays only to a buyer who values the project at least £0.16m more than you do.
What to notice. Because a typical buyer sees the project as you do, the fee takes the same £0.42m off its bid as off the project’s worth to you. Who’s buying matters more than the fee: a cautious buyer wouldn’t bid even without the fee.
Find the switch points
This step takes four of the example’s assumptions, the commitment fee’s level, the battery’s income, your risk appetite and your cost of money, and finds each one’s switch point: the value at which walking away would beat accepting all 200 MW. The further your value for an assumption is from its switch point, the less the answer depends on getting it exactly right.
Each chart shows what accepting all 200 MW is worth to you as one assumption moves, with the fee as proposed. Where the line drops to £0, walking away wins: it’s worth nothing, and accepting would be worth less. Move the sliders to try your own values.
Commitment fee
The fee held at one level per MW from October 2027 until the battery connects
With no fee: accept all 200 MW, worth £7.33m to you.
Walking away would win only above £94,513 per MW, almost four times the proposed maximum of £25,000.
What your battery earns
Trading income as a multiple of the published revenue index for two-hour batteries
At 1.60 times the index: accept all 200 MW, worth £6.62m to you if the fee comes in as proposed and £7.33m without it.
Walking away would win below 1.451 times the index if the fee comes in as proposed, and below 1.435 times without it. Between 1.435 and 1.451, the fee alone tips it to walking away. The example uses 1.6.
Your weight on the downside (your risk appetite)
The weight on the worst 1 in 20 results, with the rest on the average: the higher the weight, the more cautious you are, from 0, where only the average counts, to 1, where only the worst 1 in 20 does
At a weight of 0.25: accept all 200 MW, worth £6.62m to you if the fee comes in as proposed.
Walking away would win above a weight of 0.35. The example uses 0.25, and a cautious buyer 0.5 (Step 4).
Your cost of money (WACC)
A year, in real terms (above inflation)
At 8% a year: accept all 200 MW, worth £6.62m to you if the fee comes in as proposed.
Walking away would win above 9.5% a year. The example uses 8%.
Three other assumptions, about the commitment fee and what it costs you, never change the answer over the ranges the engine tried: accepting all 200 MW stays the best choice whatever the chance that Ofgem approves the commitment fee, or that it climbs at each review, from 0% to 100%, and whatever the bank’s charge on the security, from 0% to 50% a year.
What to notice. The commitment fee’s level is the assumption furthest from its switch point: walking away would win only if the fee were almost four times the proposed maximum. The others are much closer: walking away would win if the battery earned about 9% less, if your money cost 9.5% a year instead of 8%, or if your weight on the downside rose from 0.25 to 0.35.
For each assumption, the engine values the project across a range, with the others as in the example: the fee’s level from £0 to £120,000 per MW, the income from 1 to 2 times the index, the weight on the downside from 0 to 1, and the cost of money from 4% to 20% a year. Where the answer flips between two values it tried, it tries the value halfway between, again and again, until it pins down the switch point. Each chart’s line joins up the values it worked out.
What the fee costs you depends on your consents and your connection date
The commitment fee only costs you where it’s above your own security. Once your key consents are in place, your own security falls to 10% of the cancellation charge, and the fee sets your security from then on, so a project with consents feels the fee most. If the fee comes in as proposed, it cuts what the project is worth to you by £0.74m if your key consents are already in place, and by £0.71m if they’re in place from October 2028.
The commitment fee keeps your security up until the battery connects, so each year the battery connects late adds about £0.27m to what the fee costs if it comes in as proposed. QueueWatch shows how often connection dates in the queue slip.
What we’ll work out for your project
Your project’s answers will differ from this example’s, because a study for it uses your own connection offer, securities, consents and costs, with a market forecast. It works out the answers with the commitment fee as it may come, if it comes in as proposed and without it, so you can see how much the fee matters to you.
What your project is worth, with the commitment fee and without it
Based on your own securities, consents and connection date, and how much the commitment fee takes off.
How many MW to accept, and when to give any up
Now, and at each of the commitment fee’s six-monthly reviews.
The switch points
The commitment fee’s level, income, cost of money and risk appetite at which walking away wins, in plain words.
What buyers would bid
For a typical and a cautious buyer, and the lowest bid worth accepting if you sell.
We will give you a report where every assumption is listed with its source and the switch points are given in plain words. One re-run after your comments is included. The report is decision support. It isn’t investment advice or a formal valuation.
How to cite this page
You’re welcome to quote our figures, charts and findings with this credit:
QueueQuant, “What’s your Gate 2 connection offer worth with the new commitment fee?”, queuequant.com/worked-examples/gate-2-offer-commitment-fee/ (October 2026).