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Curtailment Agreements UK: Grid, Rules & Terms

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Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
Curtailment agreements sit at the heart of how the UK keeps its electricity grid stable. When generation outpaces demand, or when part of the network cannot physically carry the power being produced, generators can be asked to dial back or pause output. The contractual and regulatory arrangements that sit behind those instructions are what people usually mean by a curtailment agreement. For anyone developing, financing, or operating a generation asset, particularly in wind, solar, or battery storage, these arrangements can have a real impact on revenue forecasts and project viability. This guide walks through the legal backdrop, the commercial terms you will typically see, and the practical issues that tend to cause friction between generators, network operators, and investors.

What this document is

A curtailment agreement is a contractual framework that sets out when and how a generator's electricity output can be reduced or switched off at the request of the system operator or a relevant network operator. In the UK context, curtailment can happen for several reasons: grid-wide balancing needs managed by the National Energy System Operator (NESO, formerly National Grid ESO), local network constraints managed by a Distribution Network Operator (DNO), or commercial arrangements tied to a connection offer.

These agreements typically govern how much curtailment can be imposed, how the generator is notified, whether any compensation is payable, and how disputes are resolved. For connections offered under 'non-firm' or flexible connection terms, accepting a higher level of curtailment is often the trade-off for getting connected faster or at lower cost. Understanding which category a project falls into matters, because the commercial consequences are quite different.

How to use this document

  1. Identify the type of curtailment that applies. Work out whether your exposure comes from a flexible or non-firm connection agreement with a DNO, from participation in the Balancing Mechanism run by NESO, or from a commercial PPA clause. Each route has its own rules and compensation position, and projects often sit across more than one.
  2. Review the connection offer and any annexes carefully. A connection offer may include Active Network Management (ANM) terms, curtailment caps, principles of access, and priority rules between generators on the same constrained part of the network. These provisions can dictate how often you are curtailed first when the system is tight.
  3. Model the revenue impact realistically. Build curtailment assumptions into your financial model using historic data for similar assets in the same constraint zone where available. Investors and lenders will expect a curtailment sensitivity, and optimistic assumptions are one of the most common reasons forecasts later disappoint.
  4. Check notification, metering, and dispatch mechanics. The agreement should explain how curtailment instructions are sent, how quickly you must respond, and how curtailed volumes are measured for any compensation or settlement purposes. Ambiguity here tends to cause disputes once the asset is live.
  5. Plan for change, including regulatory reform. Ofgem and NESO continue to review connection reform, queue management, and constraint payments. Your agreement should be read alongside current industry codes such as the Grid Code, Distribution Code, and CUSC, and you should keep an eye on consultations that could affect your position.

Common questions

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Common questions

Q Who can instruct curtailment of a UK generator?
The National Energy System Operator handles system-wide balancing and transmission constraints, while Distribution Network Operators manage local constraints on their networks. Which body issues instructions to your asset depends on how and where it is connected. In some cases, a commercial counterparty such as an offtaker or aggregator may also have rights to adjust output under a power purchase or optimisation agreement.
Q Do generators get paid when they are curtailed?
It depends on the route. Generators accepted into the Balancing Mechanism can be paid to reduce output through accepted bids. Generators on non-firm or flexible connections often accept curtailment without direct compensation as part of the deal for a faster or cheaper connection. The position should be spelled out clearly in your connection offer and related agreements.
Q What is a non-firm or flexible connection?
It is a connection offered on the basis that the generator accepts curtailment when the network cannot accommodate full output. This approach lets DNOs connect more capacity on constrained networks without waiting for full reinforcement. The trade-off is exposure to potentially significant curtailment hours each year, which should be modelled before accepting the offer.
Q How does curtailment affect project finance?
Lenders will stress test revenue forecasts against curtailment scenarios and may require headroom in debt service cover ratios. Persistent or worsening curtailment can affect refinancing and valuation. Having clear contractual protections, accurate historic data, and realistic forward assumptions is important when presenting a project to investors or funders.
Q Can curtailment terms be renegotiated later?
In some cases yes, particularly where network reinforcement completes, where regulatory reform changes the framework, or where a firm connection becomes available. However, there is no automatic right to upgrade, and moving from non-firm to firm status often involves cost, queue position, and timing issues. Early engagement with the relevant network operator is usually sensible.
Q Which industry codes are relevant?
The Grid Code, the Distribution Code, the Connection and Use of System Code (CUSC), and the Balancing and Settlement Code (BSC) are the main ones. Your specific obligations depend on your voltage level, connection type, and whether you participate in balancing services. Ofgem oversees the regulatory framework and can modify these codes following industry consultation.
Q What should I look for before signing a connection offer?
Check the curtailment cap (if any), the principles of access, the priority rules between generators, notification arrangements, metering provisions, and any mechanism for reviewing terms as the network changes. You should also understand how future reinforcement, queue reform, and zonal pricing proposals could affect the economics over the lifetime of the asset.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.