The story of the 2020s in the UK electricity sector so far has been partly one of frustration. Across the energy networks the infrastructure needed for the low carbon transition has been delivered too slowly, thanks partly to a regulatory framework still based around earlier aims to ensure networks were not built ‘ahead of need’, with the gas, electricity and emerging energy vectors each considered in isolation. Now government and industry is hoping to cut through delays by setting up an ‘energy system operator’ for Great Britain, tasked both with developing the new markets needed and helping speed delivery of the necessary energy infrastructure. (Note the Northern Ireland electricity market is separate and part of an ‘all-island’ market on the island of Ireland.)
Julian Leslie is Director of Strategic Energy Planning in the new body, recently named the National Energy System Operator, and now being turned from plan into reality, with the launch scheduled for summer 2024.
Leslie had a long career with National Grid and its Electricity System Operator subsidiary NGESO, which currently has responsibility for future network and system balancing functions in the electricity sector.
NGESO will be the nucleus of the NESO. Why was the change needed? Leslie says partly it is about guaranteeing independence: there could be “a perception that the system operator would always favour an asset-based solution over a market solution, because that is the way National Grid [in its network-owning subsidiaries] makes its money.” But the broader ambition of NESO is a ‘whole system’ approach to energy, which he says is ‘breaking new ground’ internationally. “When you look at the transition that is needed, not just in electricity but across the whole energy system, building on that ISO model to bring in more of the energy vectors, to bring in the energy network solutions – looking at the methane gas network and at potential roles and opportunities in hydrogen and CCUS networks – once you have this independent body you really can be the glue that sits at the heart of the whole energy transition.”
NESO is owned by government, and has a government-appointed chair (Dr Paul Golby), but will otherwise be entirely independent. So, “the decisions we make will be in the best interests of the consumer whist delivering on the priorities of the government and the priorities of the regulator.” It also has a policy advisory function to government, where “If we are able to objectively advise on and challenge policy we will say so. We are not a supplier, we don’t have interests in generation or network assets and therefore we are totally independent.”
The new body will be regulated by Ofgem as a ‘not for profit’ organisation. Leslie says the regulatory relationship will be new: “Historically [NGESO] have had incentives, so if we perform well we can make more profit, we want to keep that focus within the NESO and are working with Ofgem on the regulatory construct…. As we move into the NESO they will set out allowances and will hold us to account on being efficient, on delivering our outcomes.”
Taking in the whole system
Setting out the new NESO’s roles, Leslie says: “we will still be responsible for the real-time operation of the electricity system, as we are today. We are not taking over the real time operation of the gas system. However, we will be doing the long term network development plan for electricity, for methane [ie natural gas] and potentially hydrogen and CCS.”
However, National Gas Transmission, which owns the gas transmission network, remains the real-time physical gas system operator. Leslie explains, “It’s the safety case on the gas system operator. Logistically, [given the] risk profiles, it is just too much to do to split the owner and maintainer of the asset in the gas network from the real-time system operation. Electricity fails safe: if there is a problem the breakers open and it disconnects that part of the network. .. But [the risk of explosion means] the gas safety case doesn’t allow separation of system operation and ownership.”
However, for gas, “We will do the long term network planning…up to the year ahead” and present it to the gas networks to make their investment. This will be somewhat similar to the evolving electricity network expansion process – which NESO should also be able to speed up in the journey from concept to delivery, because NESO’s work will include economic optioneering that justifies expansion.
Despite discussion over the future of methane “we need to be thinking about what investments you need in the long term such that you can operate the system under all conditions. …maybe you need more assets, like compressors, to make sure that you are getting the gas to where it needs to be at the time you need it…working with NGT, that’s what we will be thinking about and it will drive any potential investment plans.”
When it comes to markets, in electricity NESO will operate real-time balancing and ancillary markets, and design and possibly operate new markets for gas, hydrogen or other vectors.
Gas networks have concerns that the new NESO’s roots in electricity could make other energy vectors just an ‘add on’. Responding to that concern Leslie says, “It’s one of the key things we are conscious of. We don’t want to be an electricity business with a bit of gas stuck on the side.”
As director of strategic energy planning he is responsible for electricity network design, gas network design, and potentially, in the future, hydrogen and CCS network design. “So in my team we are having to build that capability and bring all these things together. What that enables us to do – the models that we use, the input assumptions, the outcomes we are trying to achieve are absolutely consistent. So when you are looking at a nuclear future, or a decentralised consumer-led future or whatever, you can put these options in and you can see by the modelling the impact that decision has on the electricity networks, the methane network, on the potential hydrogen networks of the future. We are really baking that in from day one.”
He says this is where there will be new roles, because as well as delivering a Strategic Spatial Energy Plan (SSEP) for GB, NESO will have to deliver around 13 Regional Energy Strategic Plans. “We haven’t had to do them before, they don’t exist in GB, therefore we have the opportunity to build them on a whole energy system basis from the ground up.”
New responsibilities
Leslie says, “Timescales are tight. We have committed that the first Whole Energy System Network Transmission Network Plan will be delivered at the end of 2026.”
The shape of those plans depends on some key policy decisions. Leslie says NESO will “build a range of potential network options thinking about environmental, community cost and deliverability issues. Then look at the range of options you can drive that might facilitate the networks that might facilitate that energy mix into the future. We then need to do a Strategic Environmental Assessment, so there will be a national consultation, then following the results and the conclusion of all that we will publish the first Strategic Spatial Energy Plan, which will be endorsed by government at some point in 2025.”
The nascent NESO had confirmation in November 2023 that it would have Regional Energy System Planner (RESP) responsibilities. Leslie says that framework is still in the design phase, but he is conscious regional plans will be important for electricity distribution networks as they prepare plans to be submitted to regulator Ofgem. He says, “we need to have a common set of input assumptions, and a common set of outcomes that we are looking to achieve by region, that then the DNOs can use to feed into their price control submission”.
Moving from electricity to the ‘whole system’ means his team will grow from around 115 to over 200. “We need the gas capability. We also need – as we haven’t before – environmental and stakeholder personnel as well. A Strategic Energy Assessment is a public consultation with the nation and to make the plan that we finally deliver acceptable to the public they need to be brought on the journey and communities have to have their voice heard.”
As for the regional planning role, Leslie wants to co-ordinate, not duplicate, existing work including a suite of Local Area Energy Plans already produced via local authorities. “So a lot of this is about collating data and information that is already out there. We are working now on a strategy that will build GIS capability that can suck in all this regional locational-specific information and present it back to the analysts and engineers and whoever needs to look at it.”
He says that has to be ‘digital first’: “when you think about the scale of the regional energy system planners working across the thirteen or so regions across Britain, the amount of data, the amount of councils, the number of local area energy plans that exist, all the developers, the DNO networks and gas strategies…trying to pull all that together and make sense of it all, we have to use a digital solution.
“The bit that’s missing…at the regional level especially, is the co-ordination and collaboration, and the common input assumptions and the common output assumptions as to what the region is trying to achieve.”
Julian Leslie believes the new NESO will be a unique body, but it faces a challenge common to energy system operators worldwide: enabling the shift to Net Zero and doing it faster.
It is being set up as a General Election looms some time in the coming year, but Leslie says policy is largely consistent across the main parties. “Having a plan that gets you to 100% zero carbon operation in the electricity network is something that both governments will require and it is a no-regrets position”. There is only one extra challenge if there is a change of government: the low-carbon transformation may be accelerated. The NESO will have to be the enabler.
