National Grid Electricity System Operator (ESO) has submitted its Business Plan for the RIIO-2 period to Ofgem, outlining its plans to operate a carbon free, balanced system while lowering consumer bills.
The plan begins by highlighting the success seen in the UK energy sector in recent years, including over 3,500 coal free hours in 2019, 9.55GW of power generated from solar and a 60% increase in active Balancing Mechanism Units.
“The energy landscape is undergoing a revolution – and change will continue at an even greater pace,” the plan reads.
It goes on to say that helping to create a net zero system is “central” to the operator's mission, but renewables growth amongst over factors has increased challenges.
To manage these the ESO is looking to bring in a number of new systems and strategies over the RIIO-2 period including:
- New Control Centre architecture and systems.
- Increased stability through new area monitoring and control systems.
- New market and auction platforms to increase competition, enabling small aggregators to take part.
- A new digital engagement platform to facilitate data use and sharing.
- A new competitive processes.
- A streamlined network connection process.
These new systems will be brought in on top of its current activities balancing the grid, its role as the electricity market reform delivery body and managing industry revenue flows.
IT systems will continue to be improved to manage the capacity market and support balancing services procurement. These will allow for improved modelling and analytical capabilities, which will help the operator when putting together the Network Options Assessment and Future Energy Scenarios.
National Grid ESO says these changes will provide net benefits of £2 billion over the RIIO-2 period, which equates to around a £3 reduction in every bill a consumer receives a year.
The business plan focuses on the first two years of RIIO-2, with National Grid ESO to have a two-year business planning cycle within the five year RIIO-2 period.
It is proposing an average spend of £257 million per year. Of this £60 million will be new investments, accounting for the majority of the increase in investment from RIIO-1.
£71 million will be spent on direct operating costs, £20 million on shared service costs and £106 million will go to ongoing IT costs.
Some criticism was made of Ofgem’s proposed funding model, with the ESO saying that amendments must be made if it is to fit the operator's business.
“We have undertaken a financeability assessment in this business plan based on Ofgem’s working assumptions. Unless changes are made, we do not believe they support a financeable business, or encourage the ambitious and proactive behaviours that are desired by our stakeholders and required to deliver value to consumers.”
The ESO’s Business Plan for RIIO-2 states that it will have a “crucial role” to play in the UK’s transition to net zero. The operator believes its “ambitious”, stakeholder led plan will enable transformation as well as continued reliable energy.
Fintan Slye, the ESO’s director of UK system operator said: “Our business plan is founded on a vision for the next decade and beyond, focusing on how we must evolve to meet the challenges of the changing energy landscape and maximise benefits for consumers.
“As well as delivering new systems and market platforms, we must also transform our capability through investment in information technology, innovation and people. The introduction of a new RIIO-2 regulatory framework is an opportunity to put in place a funding model and incentive scheme that drives the right behaviours.”