Electricity system operator incentives

We undertake the role of System Operator (SO) for the National Electricity Transmission System (NETS) in Great Britain. Electricity SO incentives are designed to deliver financial benefits to the industry and consumers by encouraging the SO to operate in line with the four roles and seven principles set out by Ofgem. Here you will find out more about current and past incentives.

2018-21 new regulatory framework for the Electricity System Operator

During 2017-18, the Electricity System Operator (ESO) has been working with Ofgem on a new regulatory framework. Consultations and further information are available on the Ofgem website.

The changing energy system - increased renewables and greater decentralisation - means the ESO needs to think more holistically and longer term in order to enhance network and market access for all parties. New thinking will allow the ESO to remain agile, transparent, and customer-focused to ensure we continue to operate a safe, reliable, and affordable electricity network now and into the future. The new regulatory framework has been designed to ensure that the ESO responds to these challenges and maximises consumer benefit. This new framework aims to create transparency around the ESO’s performance and make the ESO accountable to its stakeholders.

This new regulatory framework includes a broader more evaluative approach than used previously.

The ESO is now incentivised against four roles and seven principles set out by Ofgem which are supported by new licence conditions on the ESO to establish the Forward Plan in advance on the year and to report on progress throughout the year.

Roles

Principles

Managing system balancing and operability
1. Support market participants to make informed decisions by providing user-friendly, comprehensive, and accurate information
2. Drive overall efficiency and transparency in balancing services, taking into account impacts of ESO actions across time horizons
Facilitating competitive markets
3. Ensure the rules and processes for procuring balancing services, maximise competition where possible, and are simple, fair, and transparent
4. Promote competition in the wholesale and capacity markets
Facilitating whole system outcomes
5. Coordinate across system boundaries to deliver efficient planning and development
6. Coordinate effectively to ensure efficient whole system operation and optimal use of resources
Supporting competition in networks
7. Facilitate time, efficient, and competitive network investments

ESO Forward Plan

Central to this incentive framework is the ESO Forward Plan published on 27 March 2018.  You can access it on the Future of the Electricity System Operator page.

It is an ambitious plan outlining the activities and outputs we will deliver in 2018/19 to realise value for our customers, stakeholders, and energy consumers and allows them to hold us to account for delivery.

Assessing Performance

During the year the ESO will monitor performance and produce reports to show the progress that has been made on a monthly, quarterly, half-yearly, and yearly basis.

At the mid-year point and at the end of the year a performance panel will evaluate the ESO’s performance using 5 focus areas:

  1. Evidence of delivered benefits
  2. Evidence of future benefits/progress against longer-term initiatives
  3. Stakeholder views
  4. Plan delivery
  5. Outturn performance metrics and justifications

This is the first time we have published a Forward Plan, and it marks a step-change in the levels of transparency, engagement, and accountability. Delivery against the Forward Plan will result in an incentive payment/penalty to the ESO, up to ±£30m for 2018-19. This payment/penalty is equally split between the 7 principles.

 

Performance

We are publishing monthly ESO Incentives Performance Reports, click here to see how we are doing.

For further details of our performance under the SO incentives, please refer to our Balancing Services pages and the Monthly Balancing Services Summary, which provides information on the procurement of Balancing Services.

Past incentive schemes

For details of and reporting on past incentives schemes, please go to the Past electricity incentive schemes page.

Gas system operator incentives

We are subject to a number of performance incentives to maintain and improve our daily operational efficiency and are subject to renegotiation at set intervals.

Find out more

Market, operations, and data

Data and support for users of the National Electricity Transmission System (NETS) including the latest operational data, forum, and more.

Find out more