What is Non-Firm Connection?
Non-firm connection is a system that allows new grid connections on the premise of uncompensated output curtailment during grid congestion. Previously, connections were impossible without available grid capacity, or required enormous grid reinforcement costs. With the introduction of non-firm connections, early grid connection became possible in exchange for accepting output curtailment. Since April 2023, all new grid connections—including local grids but excluding low-voltage connections under 10kW—are in principle subject to non-firm connection.
Connection contract applications (as of end of October 2024): approximately 26GW
Connection review stage (as of end of June 2024): approximately 134GW
Nearly all battery projects currently under development use non-firm connections.
Note that output curtailment under non-firm connections is caused by grid congestion at specific transmission and transformation equipment (where power flow exceeds or may exceed operational capacity). This is a different mechanism from output curtailment based on area-wide supply-demand balance (priority dispatch rules). The "curtailment" widely reported in areas like Kyushu is primarily due to supply-demand constraints and differs in cause and control sequence from the grid-congestion-based curtailment discussed here.
What is important for batteries is that output curtailment extends not only to the "discharge side" but also to the "charging side." However, the control mechanisms differ between discharge and charging.
- Discharge side (reverse power flow): As part of non-firm connection congestion management, discharge is curtailed online during grid congestion (same mechanism as solar). Curtailment may also apply even when the directly connected equipment is not congested, if it affects congestion on upper-level equipment
- Charging side (forward power flow): Installation of N-1 charging stop devices is required, and charging automatically stops when a single transmission line fails. Additionally, in grids with insufficient charging-side capacity, a "charging restriction contract" may limit charging during congestion (nationwide operation of charging restriction contracts began April 1, 2025)
Discharge-side curtailment is relatively predictable, but charging-side restrictions are linked to sudden N-1 fault events, making them different in nature.
How Often Does Curtailment Actually Occur?
In conclusion, the impact is limited at present. However, the situation may change from FY2027 onward as non-firm connection volumes increase.
- Around FY2027: Congestion expected to begin in some grids during shoulder periods (light load)
- FY2028 onward: Congestion expected even during peak demand periods
- Congestion tends to concentrate during light load periods in some grids in Tohoku, Tokyo, Chubu, and Chugoku areas
However, congestion is limited to specific time periods and specific grids, with annual impact considered limited.
The method for managing output curtailment during grid congestion has evolved in stages. Initially (January 2021 to December 2022), only non-firm power sources were curtailed uniformly. From December 21, 2022, a "re-dispatch method (utilizing adjustment power sources)" was introduced based on merit order. From December 28, 2023, the current "re-dispatch method (fixed sequence)" has been applied, curtailing all power sources—not just non-firm—in a defined order.
To improve predictability of curtailment volumes, each general transmission and distribution operator publishes "information on projected grid power flows" on their websites. Battery operators can check the congestion status of "main equipment affecting curtailment volumes" (trunk grid group and local grid transformers and transmission lines) listed in the connection review response through this public information.
How to Read N-1 Fault Records
Connection review responses include "N-1 fault records." This indicates how many accidents (N-1 faults) have occurred on the relevant transmission line or transformer. When an N-1 fault occurs, the battery output is instantly cut off by N-1 transfer tripping.
For example, "0.667 times/year" means 2 faults occurred over 3 years. From this frequency and recovery time, the annual shutdown risk can be estimated. If frequency is low, the revenue impact is minimal; conversely, equipment exceeding 1 time/year requires attention.
Participation Restrictions for Capacity and Balancing Markets
The biggest concern for non-firm connected batteries is "will market participation be restricted?" The non-firm connection consent form includes the following language:
"By executing this contract, the applicant accepts that participation in the capacity market and balancing market may not be possible."
Many buyers become concerned upon seeing this language, wondering "can we not participate in either market?" However, this is a legal reservation for future restriction possibilities, not a blanket prohibition at present.
- Capacity market: Non-firm power sources are permitted to participate in main auctions for FY2027-2029. However, this is positioned as "for the time being" and is not a permanent guarantee
- Balancing market: Non-firm power sources are permitted to participate for the time being (until FY2028). However, during grid congestion, delta-kW (adjustment capacity) activation may be restricted, with alternative procurement from non-congested grids
Both are provisional measures decided on a fiscal year basis and should be noted as not being permanent rights.
Outlook for FY2029 and Beyond
From FY2029 onward, the situation differs between the capacity and balancing markets.
Balancing market: Treatment from FY2029 onward is undecided. The 54th Balancing Market Review Subcommittee (March 2025) explicitly states "for the time being (until FY2028)," and participation restrictions may be introduced from FY2029 based on expanding congestion impacts. Further deliberation is delegated to the "Working Group on Future Operational Capacity."
When incorporating balancing market revenue into business plans for FY2029 and beyond, this must be recognized as regulatory risk.
Impact on the LDA
Whether non-firm connection affects LDA (Long-term Decarbonized Power Source Auction) bidding eligibility is one of the most important concerns for buyers.
The LDA operates within the capacity market framework, and since non-firm power sources are permitted in the capacity market, LDA bidding is also possible. All new connections since April 2023 are in principle non-firm, and given that 30 battery projects (1,092MW) were awarded in the 1st LDA (January 2024) and 961MW of batteries in the 2nd LDA (January 2025), non-firm connected projects are considered to have been awarded in the LDA.
How to Factor Into Business Plans
There are three key points when incorporating non-firm connection curtailment risk into business plans.
1. Check Congestion Outlook by Area/Grid
Even within the same Tohoku area, congestion risk differs by trunk grid group ("Aomori 1," "Miyagi 1," "Niigata 1," etc.). Check the public information on equipment listed in the connection review response and evaluate the power flow history and congestion frequency of the relevant grid.
2. Reflect "Curtailment Rate" in Revenue Simulations
Revenue reduction from output curtailment is incorporated as a discount rate against annual operating hours. Currently, the annual curtailment rate is expected to be a few percent or less, but conservative simulations should calculate 5-10% curtailment as a stress scenario. Since discharge-side curtailment and charging-side restrictions have different occurrence mechanisms, we recommend evaluating them as separate risk factors.
3. Include N-1 Trip/Charging Stop Device Costs in Initial Investment
For non-firm connections, installation of output curtailment equipment (including communication devices) is required at the battery operator's expense. Additionally, N-1 charging stop device installation, maintenance, renewal, and removal costs are also borne by the operator. These costs should be included in equipment costs as initial investment.
4. Recognize Regulatory Risks for Market Participation
Non-firm power source participation in the capacity and balancing markets is currently a provisional measure permitted "for the time being." The balancing market treatment from FY2029 onward is particularly undecided, and regulatory change risk must be factored into revenue model assumptions.
Non-Firm Risk Assessment for Each Project
We will explain how to read grid connection review responses and curtailment risk assessments for individual projects during meetings.
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