2026 is lining up to be an important year for the DERMS market as the continued deployment of Curtailable Connections picks up pace, the impact of Connections Reform becomes clearer to DER Developers, and more DER sites in the queue progress to the reality of commissioning and into operation. Our team of in-house experts have contributed to the following DER and DERMS market predictions for 2026.
Connections, Gates and Milestones.
- Connections Reform, and more specifically the process of evidence submissions and NESO/DNO process, put a pause on development activity for much of 2025. There is still uncertainty in the expected rate for greenfield development to pick-up, particularly considering the DER capacity thresholds NESO has set across the country. Gate 1 and Gate 2 outcomes are triggering more exit/acquisition activities, and with connection timescales brought forward, we are seeing some developers focus on build and commissioning efforts.
- Timescales for provision of Gate 1/Gate 2 offers continue to shift to the right, for developers this means a longer period of uncertainty for the finer details of connection offers. Gate 2 status and queue position is understood, but not other variations to connection agreements. We are now looking at the end of Q2 for additional detail, likely even Q3 for those connecting after 2030. Challenges are expected from some developers on their assignation of Gate 2 status, which may further delay offer issue timescales.
- Whilst Gate 2 queue positions were shared in December, we expect the reality to be different once there has been a round of offer acceptance/rejections later in the year. Positions provided in December will not be consistent and not all Gate 2 offers will be sufficiently lucrative when other grid costs are considered.
- What does this mean for SGS? A growing number of transactions mean developments continuing to change hands and ongoing need to assess the impacts of changing queue positions and updated reinforcement timescales. We have seen greater desire for more detail and forward-looking scenarios/forecasts across longer timeframes to support decision making at later stages of the development lifecycle. We expect that to continue in 2026 as queue positions change and we gain a better understanding of the grid developments that are facilitating these accelerated connections.
Technical Limits: connection dates have been accelerated, and now the challenge is to deliver connections with the enabling Active Network Management (ANM) infrastructure.
- Successful introduction of Technical Limits has accelerated DER connection timescales for many, allowing DER to connect with transmission capacity restrictions managed via new export and import limits at the Grid Supply Point (GSP). Uptake of Technical Limits offers is allowing DER to connect much earlier, albeit with a temporary period where curtailment may be required ahead of transmission system reinforcement.
- With the DER customers accepting these Technical Limit connection offers, and the connection timescales accelerated, the pressure is now on for both Developers and DNO to mobilise and meet these accelerated connection timescales.
- For DNOs this means mobilizing construction teams and the control infrastructure (ANM) that will manage import and export at each Technical Limits GSP through real-time control of DER sites. Many DNOs have a head start here in areas where distribution constraints have already triggered ANM deployment, however there are many more GSPs that require Technical Limits control.
- At SGS we have seen a big acceleration of ANM roll-out activity, with DNO deployment schedules and priorities changing to reflect the introduction of Technical Limits. 2026 will be a year of continued roll-out. The first ‘Technical Limits’ site was energized at the end of 2025 (under control of our Strata Grid platform), and we forecast many more of these sites being energized and under Technical Limits control throughout the year. That will mean more operational experience of the Technical Limits concept for NESO, DNOs and the DER sites under control.
- What comes next? Since the introduction of Technical Limits, our view has been that whilst this is an important step in T & D interaction that brings benefits to DER, it is only a first step. The import and export thresholds that have been set as Technical Limits are highly conservative (based on worst-case seasonal conditions on the transmission system), and limits are fixed on a seasonal basis. We anticipate that as NESO and DNOs gain greater confidence based on operational experience, there will be moves to introduce more granular limits that on occasion will improve Technical Limits headroom on the distribution system. DNO deployments of ANM have proven that this is technically feasible, and the increase of headroom for DER (when there is sufficient transmission capacity) releases the significant system-wide benefits of embedded renewables and storage. To make this successful, demand is needed from the DER Developer community and drive from NESO and DSO to enhance the successes of Technical Limits to date.
Will 2026 be the year of AI for DERMS? Don’t bet on it.
- There has been much talk of new applications of AI and the great productivity efficiencies and new functionalities that will be unleashed. Whilst many of us have quickly become familiar with the benefits of AI tools based on Large Language Models, what does AI mean in practice for areas such as DERMS and critical operational technologies?
- Firstly, utilities can achieve clear operational efficiencies in processing connections and in customer service. Efficiencies in document creation, legal drafting and providing improving customer interactions are all likely to increase.
- Secondly, AI and its techniques can play an important role with the growing volumes of data available to utilities. Areas like forecasting and data cleansing can allow utilities to improve and process vast volumes of data to gain new insights into their customers to improve both planning and operations.
- Thirdly, there are also potential application of AI for software companies, like SGS, in software development and testing. The challenge for companies like SGS, whose software operates on critical national infrastructure, is in vetting AI to ensure bugs or other malicious code are not being introduced to the system. Tools and services will be developed in the future to identify these, but for now the efficiencies do not outweigh the risks. With increasing geopolitical tensions, cybersecurity attacks, and tightening regulations, this is an area we are unlikely to see develop for some time.
- Lastly, the algorithms performing real-time control on networks are unlikely to utilize AI in the near future. This reflects legitimate considerations for a DNO implementing new operational technology solutions. From the early days developing the ANM algorithms used to deliver autonomous grid control in our products, a crucial requirement has been to maintain a DNOs ability to understand the rationale behind control decisions and avoidance of ‘black box’ processes with limited traceability in decision-making. We expect to see similar scrutiny in the case of AI applications in the network operations and control area.