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.
|Managing system balancing and operability|
|Facilitating competitive markets|
|Facilitating whole system outcomes|
|Supporting competition in networks|
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.
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:
- Evidence of delivered benefits
- Evidence of future benefits/progress against longer-term initiatives
- Stakeholder views
- Plan delivery
- 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.
We are publishing monthly ESO incentives performance reports. Go to the ESO incentives performance page 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.