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National Grid sets out delivery plan for legal ESO separation

Image: National Grid.

Image: National Grid.

National Grid has outlined the key activities it will deliver over the next year as it prepares to launch the new independent Electricity System Operator (ESO) on 1 April 2019.

Plans for the legally separate company to be set up within the National Grid group were announced at the start of 2017, with the new entity seeking to play an active role across the energy system to shape developing markets.

The transmission system operator (TSO) has published its Forward Plan for the year to April, which will see it implement changes to current operations across a number of core areas. This includes working with industry to make “fundamental changes” to how it communicates with customers around flexibility.

This has been a major concern for many in recent months as the market for system services procured by National Grid has diminished in the face of surging interest from providers. The Forward Plan states that action is being taken after stakeholders told National Grid they found how the TSO procures flexibility to be “too complicated” and “hard to offer services to the ESO”.

The TSO has already begun developing a new suite of products to which the private sector will be able to tender, however it remains unclear what values or capacity will be available, or when. However, it has stated that over the next two years this will be addressed to improve procurement “through efficient and transparent markets”.

One of the key principles of the programme will be to ensure the rules and processes for procuring balancing services maximise competition where possible and are simple, fair and transparent.

This will include standardisation and simplification of the firm frequency response (FFR) contract structure; development of an integrated approach to buying standard and faster-acting frequency response; a week ahead auction trial for response; implementation of the TERRE central platform to facilitate the close to real-time exchange of replacement reserves, alongside several other initiatives.

The ESO Forward Plan will also boost network competition by evolving its Network Options Assessment (NOA) process to consider a wider range of commercial and technical solutions. This could include working with distribution network owners (DNOs) and other parties to identify distribution network and other non-traditional solutions such as battery storage.

Similar to the Energy Networks Association’s Open Networks project, the ESO will also adopt a whole system approach, improving cooperation with DNOs develop operational and commercial approaches that will release capacity on the distribution networks and allow more parties to connect and participate in markets.

This workstream will also seek to initiate work with partners to trial different commercial models for parties to buy and sell energy and services to the ESO and each other.

“In partnership with DNOs, we have adopted a ‘learning by doing’ approach to test agile and innovative solutions with regional development programmes in areas that are facing the highest levels of distributed energy deployment,” the plan states.

Finally, the ESO will pursue an active role supporting Ofgem and the industry in reviewing and reforming network charging and access arrangements to level the playing field for market participants.

Following consultation, the final version of the ESO Forward Plan will be published in March before going live on 1 April 2018, a year before Ofgem previously ruled that National Grid must complete the legal separation.

National Grid's ESO plan at a glance - four roles and key actions. Image: National Grid.

National Grid's ESO plan at a glance - four roles and key actions. Image: National Grid.