Changes to the Electricity System Operator and further grid connection reform

Update 1: Change to NESO

From 1 October 2024 the Electricity System Operator is separating from National Grid and becoming the National Energy System Operator. NESO we will no longer be part of National Grid PLC and will become a public corporation owned by the Department for Energy Security and Net Zero. The intention behind the change is to enable NESO to be established as a new independent organisation responsible for planning Britain’s energy system, operating the electricity network and offering expert advice to the sector’s decision-makers.

NESO will be operating under the same company number, but there are some changes existing customers of NGESO should be aware of:

1. During the month of October, there will be a phased transition across to the new NESO IT which will include changes to the application URLs and API addresses – the new website addresses can be found here: Helping our customers get ready for NESO | ESO.
2. All Purchase Orders created from 1 October should use the company name “National Energy System Operator Limited”. Any Purchase Order created prior to 1 October will not be reissued with the National Energy System Operator Limited company name or branding.
3. Although from 1 October 2024 there will be a name change from ‘ESO’ to ‘NESO’, the company will legally remain the same corporate entity, and the company number registered at Companies House will remain unchanged (11014226). Any contracts entered into will remain in full force and effect.
4. Where contracts specifically include contact details for formal communications or notices under the contracts:
1. from 1 October 2024 any contact address 'National Grid Electricity System Operator Limited, 1 – 3 Strand, London WC2N 5EH' shall be updated to 'National Energy System Operator Limited, St Catherines Lodge, Bearwood Road, Sindlesham, Nr Wokingham, Berkshire, RG41 5BN'; and
2. from 1 November 2024, the e-mail addresses for notices '@nationalgrideso.com' and / or '@nationalgrid.com' shall in each case be replaced with '@nationalenergyso.com'.

 

Update 2: Ofgem's latest 'Open letter on the reformed regulatory framework on connections'

On 16 September 2024, Ofgem has published its latest update on the development of the TMO4+ code modifications, found here: Open letter on the reformed regulatory framework on connections.

This new letter sets out Ofgem's vision and the next steps regarding the connections reform process, including the roles and interactions between the TMO4+ code modifications, methodologies, and licences.

The letter sets out how Ofgem are looking to ensure that alignment between connections and the strategic planning demands of the GB energy system are incorporated in the current connections reform. As such, any necessary licence modifications are to be considered now, in tandem with the TMO4+ code modification proposals already being discussed.

On 1 August 2024, the Connection Delivery Board (CDB) discussed ways in which TMO4+ could be strengthened with strategic planning. ESO presented a range of options to the CDB, including the potential introduction of:

1. technical requirements; and/or
2. quantified limits on annual connections at certain locations of each technology type.

CDB directed ESO to proceed with developing more detailed ‘going further’ proposals in relation to these options. As such, the ESO is required to consider additional factors, that it does not currently take into account, in considering connection applications and making connection offers.

In 'going further', the letter then sets out three potential Methodologies ESO have proposed, subject to Ofgem approval:

1. Gate 2 Criteria: This would specify criteria that relevant applicants connecting at the transmission system need to meet to receive a connection offer with a confirmed connection location and date, and a place in the connections queue. This methodology may include technical requirements and/or limits on connections at certain locations of each technology type. These criteria would be applied for entry into Gate 2.
2. The ‘Connections Network Design Methodology’: This would set out the process and criteria for formulating indicative and full connection offers at Gates 1 and 2 (as per current CMP434 Proposal), including the interaction between the assessment of the enabling infrastructure required for connections and strategic network plans for the wider transmission network.
3. The NESO designation methodology: This would set out the criteria for ‘designation’ of individual projects that have met Gate 2 to be prioritised. It is expected these criteria could apply to projects which are critical to security of supply or system operability, which would materially reduce system/network constraints, are innovative / emerging technologies, or that have particularly long lead times.

The ESO has shared the concept of the Methodologies with the TMO4+ code modification proposal Workgroups and they are taking account of this approach in the development of code modification proposals.

The ESO is preparing early draft Methodologies, based on the ongoing development of TMO4+ proposals. The letter states that Ofgem expect the ESO to consult on these draft Methodologies later this year.

 

Next Steps

Prior to Ofgem taking any decision on new licence conditions, Methodologies and proposed code modifications, necessary consultations will be carried out.

Ofgem's intention is to reach a final decision on the necessary changes to the codes and licences, including approval of any Methodologies, by the end of Q1 2025. If Ofgem decide to implement the relevant modifications to codes and licences these are likely to take effect from Q2 2025. Ofgem expect that if the changes are approved, the network companies will work at pace to ensure that they are in a position to begin issuing improved offers in 2025.

Ofgem have requested the Energy Networks Association and DNOs to assess what would be needed at distribution level (in codes and/or licences) to facilitate a reformed connection process that is effective and cohesive at both transmission and distribution.

Please contact Andreas Gunst and Sophie Linnell if you would like any further information.