Wind farms, data centres, housing developments and factories all depend on reliable grid connections for importing or exporting electricity. Securing these connections is critical—but growing delays in accessing distribution or transmission networks have pushed developers to explore alternatives.

In some cases, microgrids, smart grids, and private wire networks may offer faster and cost-effective solutions for your projects. In this article, we examine these options and outline the key considerations you need to know.

Microgrids, smart grids and private wire networks – what do they mean?

The energy sector is changing fast. New systems like microgrids, smart grids and private wire networks are emerging as innovative, cost-effective options – but what are they? If you want to take advantage of new technology and modern energy systems, understanding these terms is essential. Here are the commonly accepted definitions:

• Microgrid a small, localised energy system that can operate independently or in connection with the distribution/transmission grid networks. This system will typically consist of energy generation technologies (i.e. rooftop solar and wind turbines) and batteries, used across defined areas like a neighbourhood, campus, industrial site or community. This scheme can ensure a reliable power supply during main grid outages.
• Smart grid: an advanced power system which uses real-time data, automation, and two-way communication between the utility operator and the end user to optimise electricity distribution. This system allows utility operators to detect and respond to changes in energy demand quickly. Typically, smart grids are integrated with batteries so that the electricity stored can be deployed during peak demand times and the end user is less reliant on expensive, high-demand power sources. Smart grids tend to cover larger areas than microgrids and operate in connection with the distribution/transmission grid networks.
• Private wire network: privately-owned grid network, connected to the distribution or transmission grid network. While private wire networks may also consist of energy generation technologies, they cannot operate independently of the transmission/distribution network (unlike a microgrid), and they do not have any data analysis technologies which can analyse end user data and predict periods of high usage.

Where can these schemes be used?

The UK electricity network is currently undergoing reform. You can read our latest article for more information [link here]. While these reforms progress connections which are “ready” and “strategically aligned” with Clean Power 2030, developers are awaiting the issue of Gate 2 offers following the extension of the Gate 2 to Whole Queue timetable[1].

NESO has reported significantly more connections in the queue than are “strategically aligned” with Clean Power 2030 – storage in particular is oversubscribed[2]. Ofgem has also published an open letter in November 2025[3] relating to the surge of demand connection applications, from 41 GW in November 2024 to 125 GW in June 2025 of total contracted offers. This has triggered Ofgem to review ongoing queue entry and membership requirements to ensure viable projects progress in the demand queue.

Microgrids, smart grids and private wire networks are increasingly used to reduce reliance on traditional grid imports and exports. This is especially critical if you operate data centres, which consume vast amounts of energy. With demand for data centres surging, you can’t depend solely on conventional distribution or transmission networks.

By adopting these alternative systems, you benefit from direct supply from generators, ensuring resilience and cost efficiency. As data centres need uninterrupted power, you need to pair intermittent sources such as wind and solar with battery storage. Combining renewables with microgrids can deliver significant savings compared to grid procurement, while integrating CHP or energy from waste facilities further enhances reliability.

Microgrids, smart grids and private wire networks can also allow for rapid deployment. If you’re a data centre developer, you’ll find microgrids particularly attractive for their ability to deliver localised, resilient energy systems. These solutions support critical loads and ensure uninterrupted power – an essential requirement for data centres.

Key areas you need to consider when using these schemes

Although each scheme works differently, there are common themes you should keep in mind. We’ve outlined these key considerations below to help you make informed decisions:

Regulatory considerations

Under the Electricity Act 1989, it is a criminal offence to generate, distribute or supply electricity to premises without a licence or an exemption. The Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 sets out class exemptions, but the industry widely agrees the 2001 Order is outdated and in need of reform. In a letter dated 21 November 2025[4], Ofgem indicated forthcoming DESNZ guidance Class A supply licence exemptions – a positive step towards modernisation.

When you’re considering microgrids, smart grids and private wire networks, the licensing position must be considered if you’re the developer of a technology connecting to the scheme and/or the owner/operator of the scheme. You must also be aware of duties you may have under Schedule 2ZA (Duties of distribution exemption holders) and Schedule 2ZB (Duties of supply exemption holders) of the Electricity Act.

Resilience

Microgrids, smart grids and private wire network owners are typically not licensed operators, meaning they are not held to the same standards as distribution or transmission network operators and owners. If you’re a developer of a technology connecting to the scheme, you’ll need to confirm that these schemes are built to equivalent standards, ensure you understand the maintenance requirements and whether temporary energy solutions are in place if the network needs to shut down.

Network owner breach or insolvency

If you’re a developer of a technology connecting to the scheme, you must consider contingency plans if a network owner fails to maintain standards or becomes insolvent. Unlike licenced operators, there is no “operator of last resort” for license exempt networks. If the owner of a microgrid, smart grid or private wire network becomes insolvent, no automatic replacement operator will step in to keep the system running.

How we can support you

Our Infrastructure & Energy team is ready to help you unlock the benefits of microgrids, smart grids and private wire networks. We offer:

• Specialist legal and practical advice on these schemes.
• Contract drafting and negotiation for microgrids, smart grids and private wire networks.
• Commercially-focused, cross-disciplinary support for transactions and project delivery.
• Training and insight on grid connection reform and other developments in the sector.

For further information, tailored advice or training, please contact Ben Sheppard, Sophie Linnell or any member of the Infrastructure & Energy team.

[1] Connections reform timeline | National Energy System Operator

[2] (1) Post | LinkedIn

[3] Demand connections update

[4] Balancing and Settlement Code (BSC) P498: Ensuring Correct Data Flows for Licence Exempt Supplies