The advent of NESO: an opportunity to accelerate grid connection reform?

The National Grid Electricity System Operator (“ESO”) had previously set out its plans for shortening the lengthy queue of projects waiting for connection to the UK’s electricity grid. Our previous article set out what those proposals comprised.

Following consultation earlier this year, the government has decided to acquire the ESO thereby transferring it into public ownership. The rebranded National Energy System Operator (“NESO") will, from 1 October 2024, be responsible for overseeing the wholistic planning of Britain's gas and electricity networks. NESO will be designated the Independent System Operator and Planner (the “ISOP") for the purposes of the Energy Act 2023, taking on responsibilities across electricity, gas and hydrogen, including all the existing functions of the ESO.

This long-anticipated change is expected to streamline the development of new energy infrastructure and enhance coordination across the sector. The government’s hope is NESO will also have a significant impact on the current connections queue.

According to an open letter published by Ofgem on 16 September 2024, NESO’s scope should extend to allow it greater control over the connections process in a way that facilitates the delivery of the government’s core ambition to achieve a clean power system by 2030 (“CP2030”). Helpfully, the promotion of a strategy which supports net zero as well as ensuring energy security and efficient and economic systems for gas and electricity are duties of NESO enshrined in the Energy Act 2023. Greater power for NESO to determine which projects connect to the grid and when, notwithstanding a proposed set of methodologies to put some parameters around such power, is potentially transformational for the connections process.

Ofgem sees the advent of NESO as an opportunity to accelerate the process of aligning which projects connect to the grid and when with the CP2030 ambition. The connections process is accepted as crucial to the delivery of the generation, storage and interconnections needed to meet the size and shape of demand anticipated under CP2030. On NESO’s initial task list will be the development of a Strategic Spatial Energy Plan (“SSEP”) which will set out its plan for how this can be achieved.

Ofgem’s letter strikes an urgent tone. The need to ensure coordination between connections and strategic planning of the energy system is “vitally important” it says. Targeted, effective connections reform will result in increased certainty for investors. This would in turn contribute to a much-needed increase in scale and pace of network adaptation and build out, Ofgem argues. While current projects in the queue may face some uncertainty as the shift to centralised connections planning is implemented, further clarity will come with the publication of the SSEP along with more detail from government on CP2030.

In the meantime, various modifications to the Balancing System Code and the current ESO licences are required to allow for the establishment of the NESO and the powers for it to fulfil its duties. These have been set out in previous consultation documents and will take effect from 1^st October.