Unlocking the Grid: Ofgem’s TM04+ and the UK’s Clean Power Revolution

On April 15, 2025, the UK’s energy regulator, Ofgem, finalized the Target Model Option 4+ (TM04+) framework—a transformative overhaul of the electricity grid connection system. This policy shift marks a critical step toward achieving the UK’s Clean Power 2030 Action Plan, which aims for 95% carbon-free electricity by 2030. By prioritizing viable clean energy projects and eliminating grid congestion caused by “zombie projects,” TM04+ is set to unlock billions in private investment while accelerating the energy transition.

The Problem: Grid Congestion and Stagnation

Prior to TM04+, the UK’s grid faced a 734GW backlog of connection requests, with some projects waiting up to 15 years for approval. This bottleneck stifled growth in renewable energy and energy storage, while “zombie projects”—speculative proposals that failed to demonstrate financial or technical viability—occupied critical grid slots.

The Solution: TM04+ Reforms

TM04+ replaces the outdated “first-come, first-served” system with a two-gate criteria-based approach:

Gate 1: Non-Binding Offers

Projects failing to meet readiness (technical and financial feasibility) or need (strategic alignment with decarbonization goals) receive non-binding connection offers. These projects remain in the queue but lack priority.

Gate 2: Firm Connections

Projects passing both criteria secure confirmed grid connections, prioritizing those critical to the energy transition. Key criteria include:
- Use of low-carbon technologies (e.g., wind, solar, storage).
- Contribution to grid stability and resilience.
- Geographic alignment with high-demand or constrained areas.

Scope: Local Grids and Strategic Priorities

Even local distribution-level projects (e.g., solar farms, battery storage) are subject to TM04+ if they impact the transmission grid. This ensures distributed energy resources (DERs) contribute to national decarbonization goals. Large demand projects (e.g., data centers, AI infrastructure) are also prioritized if they align with strategic needs like grid balancing.

Incentives: Unlocking Investment and Savings

The reforms aim to unlock £40 billion annually in private investment—£30 billion in generation assets (renewables, storage) and £10 billion in grid infrastructure—while saving £5 billion in avoided grid reinforcement costs. These savings will reduce consumer bills and free capital for critical projects.

Strategic Implications for Investors

1. Renewables and Storage: Developers of shovel-ready projects (e.g., offshore wind farms, solar farms) stand to benefit as gateways to faster grid connections open.
2. Grid Infrastructure: Companies like National Grid and SSE are poised to profit from £10 billion in annual grid upgrades, including substation modernization and smart grid technologies.
3. Demand-Side Players: Data centers and AI firms in grid-constrained regions may secure priority access, enabling their growth while supporting grid stability.

Risks and Considerations

• Project Readiness: Developers must now meet rigorous technical and financial milestones to secure gate access, potentially disadvantaging smaller players without capital backing.
• Regulatory Uncertainty: Ofgem’s ongoing review of its mandate (concluding in spring 2025) could introduce further changes to network regulation, impacting long-term investment planning.

Conclusion: A Paradigm Shift for Clean Energy

Ofgem’s TM04+ framework is a landmark policy that addresses grid inefficiencies while channeling private capital toward decarbonization. With £40 billion/year in investment unlocked and £5 billion in consumer savings, the reforms position the UK to meet its 2030 target while creating opportunities in renewables, storage, and grid modernization. Investors should focus on “Gate 2-ready” projects and companies leading grid infrastructure upgrades. As Ofgem CEO Jonathan Brearley stated, this is a “milestone” for both clean energy and economic growth—a sentiment backed by cold, hard numbers.

The UK’s energy transition is no longer a distant goal but an actionable roadmap. For investors, the path forward is clear: back the infrastructure and innovation that will power it.

Data Note: As of April 2025, the TM04+ reforms have already triggered a £38 billion surge in clean energy project announcements, including the £2.8 billion Cleve Hill Solar Park and the £1.5 billion Eastern Green Link 2.0 transmission upgrade.