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Future of the electricity system operator

Our role as electricity system operator (ESO) needs to change to support the transition to a more decentralised, low carbon electricity system. Find out what we're doing and how we're making changes.

The electricity industry is changing . . . rapidly

The markets and frameworks that are used to govern the electricity system need to change to meet the needs of all existing and new market participants.

Markets for balancing services, arrangements for network charging and how transmission and distribution work together need to change so all parties can participate on an equal footing, reducing costs to the consumer.

As an industry we need to ensure:

  • network and market access for all parties, regardless of business model or where they are connected;
  • enhanced investment signals for capacity, energy and flexibility services, including price signals that better represent the costs and benefits of parties on the system; and
  • the balancing market design evolves in response to the changing energy system.

A more independent electricity system operator (ESO)

The ESO sits at the heart of many of the industry frameworks that need to change and there is an important role for the ESO to play in facilitating industry transition. We will need to be more independent from the transmission owner (TO) to enable us to play this role effectively.

What we're doing

We are setting up the ESO as a legally separate company within the National Grid Group. The ESO will have a separate Board of Directors to make sure it's focused on achieving the outcomes that our customers and stakeholders deserve.

Enhanced roles for the electricity system operator will make it easier to connect to networks and access markets. The changes will provide transparency and improved investment signals for energy, capacity, and networks.

Better for business

The change will allow all parties to develop better informed commercial strategies and compete on a level playing field with other market participants.

How the ESO is changing the way it works

  • We need new tools to operate the energy system of the future
  • Our customers want us to transform how we do things to meet new requirements
  • New marketplaces are needed to deliver value for consumers

Transforming markets and governance

Revolutionising our balancing services and markets, and putting in place new commercial arrangements that support fair charging and network access.

Thinking across networks

Changing the way we see the electricity system and markets through a joined up approach across transmission and distribution. Delivering agile and innovative solutions to today’s investment and operational challenges, driving the future integration of electricity networks.

Becoming more independent

Creating an impartial and transparent ESO within the National Grid Group, trusted to lead industry change.

Improving investment decision making

Transforming our network development capability to drive down investment costs and lay foundations for future competition.

Change in four main areas

Our programme will fundamentally transform both ‘what’ the ESO does and ‘how’ we do it. It is a two-year programme that will result in changes in four main areas while ensuring a joined-up approach across them.

Flexibility

To make sure the costs of balancing the system are kept to a minimum, we need all potential market participants to contribute.

Our stakeholders have told us that how we procure flexibility is too complicated and that it is hard to offer services to the ESO. We need to review how we procure services and make sure the service needs and decisions of the ESO are clear and transparent to all market participants.

Over the next two years we will be working with industry to make fundamental changes to how we communicate with our customers and organise the system services that we procure. We will also be listening to customers and consulting with industry on how we procure services through efficient and transparent markets.

Find more, including key linked documents, on the Future of balancing services page.

Network competition

We need to make sure that we create value for our customers and bill payers through identifying the most efficient solutions for upgrading the electricity network and constantly improving our investment decision making.

We are evolving our Network Options Assessment (NOA) process so that we can increasingly look beyond transmission network solutions and consider a wider range of commercial and technical solutions. This may include working with distribution network owners (DNOs) and other parties to identify distribution network and other non-traditional solutions such as battery storage.

We will be supporting Ofgem to ensure efficient delivery of network solutions by developing competitive models and tender approaches to utilising competition to provide transmission network solutions where appropriate.

Whole system

We are improving cooperation with DNOs, for example through the ENA Open Networks Project, to create an improved joint understanding of the whole electricity system. We will work together to develop operational and commercial approaches that will release capacity on the distribution networks, allowing more parties to connect and participate in markets.

We are also working with a wide range of partners to trial different commercial models for parties to buy and sell energy and services to the ESO and each other. In partnership with DNOs, we have adopted a ‘learning by doing’ approach to test agile and innovative solutions with regional development programmes in areas that are facing the highest levels of distributed energy deployment.

We will share our findings with our customers and stakeholders to facilitate adoption of new approaches for industry ways of working that promote network access and market participation for all.

Level playing field

The ESO will play an active role supporting Ofgem and the industry in reviewing and reforming network charging and access arrangements to ensure consistency of treatment for all parties.

We are ready to provide the expertise and balanced support that industry needs to manage significant charging reform. This will make sure all industry parties can participate in the change process, understand what changes are taking place, and how their businesses can manage this change comfortably.

We want to make sure changes to network charging and access arrangements enable wider reforms in flexibility services and the adoption of whole-system thinking. Supporting access to networks and markets will result in improved investment signals for energy, capacity and services, as well as efficient network investment.

Find more, including key linked documents, on the Network charging developments and Charging Futures page.

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