A new National Energy System Operator is here in an unprecedented shake-up of the energy industry.
After decades of private companies running the UK’s energy provision, the government has decided that it’s time to take a little more control. On October 1st, the government launched the National Energy System Operator, or NESO. NESO came into formation when the government paid £630 million to National Grid, who previously had responsibility for running the nation’s energy systems operations. But what actually is NESO, and what does it mean to you? In this article, we’ll explain everything.
What is NESO?
NESO represents the consolidation of responsibilities that were previously siloed. It aims to support a nationwide strategy, coordinated and integrated across regions, suppliers and other stakeholders, to meet the challenges of climate change, maintain energy security and keep bills as low as possible.
NESO will be responsible for strategic oversight of both the gas and electricity systems. It will run market operations and manage system planning. Finally, it will keep an eye on the future and a secure, flexible, resilient energy system.
Moreover, the government insists they can form and run NESO without any extra charge to the taxpayer or energy consumer. Instead, the £630 million cost will be made up by diverting existing charges on energy bills which were previously allocated to National Grid. 500 staff will move from their posts at National Grid to NESO.
Areas of focus
As part of its remit, NESO will focus on four key areas of energy provision:
- Strategic planning – including publishing a Centralised Strategic Network Plan (CSNP) to align how gas and electricity networks are planned. It will also consider how to integrate other forms of energy, such as hydrogen
- Market development – NESO will support Ofgem in ensuring the smooth running of gas and electricity marketplaces
- Energy supply security – NESO will be responsible for exploring how the gas and energy systems can contribute to the resilience of the nation’s energy sector
- Net zero – NESO will advise the government and the regulators as they develop policies around net zero. The government has ambitious targets to hit
Looking to the future
As we move forward, NESO will be involved in several game-changing developments in the UK’s energy industry.
Firstly, it must work with National Grid as it invests a planned £66 billion over the next five years in its power networks. This ‘Great Grid Upgrade’ includes increased digitalisation and decarbonisation of the nation’s electricity distribution system.
NESO also plans to reform the electricity operating system, shifting from larger fossil fuel-powered plants to hundreds of smaller, more flexible assets. It also wants to expand demand-side innovation, including projects around demand flexibility and technology that allows electric vehicles and other assets to power the grid.
Finally, NESO will be part of a proposed phase-out of natural gas from the nation’s energy production systems. As we’ve all seen, the gas markets are highly volatile, not to mention gas being a carbon-negative fossil fuel. As we move towards a world of renewable energy, NESO must play a key role.
Central strategies
It’s good to see the government taking bold steps to make it easier to control the future of the nation’s energy, particularly around net zero. It will make it easier to make fast, win-win decisions by cutting out a layer of bureaucracy between the ideas, the strategy and the execution.
However, the targets it wants to hit are highly ambitious. If they’re going to achieve them, much more will need to be done. Watch this space to see how it goes.