The UK system operator role is set to be rolled into a separate company within National Grid Group – and may yet be made fully independent if proposed changes don’t have the intended effect.
National Grid and BEIS issued a brief statement to that effect this morning, suggesting the move will mitigate potential or perceived conflicts of interest.
National Grid earns returns by operating and balancing the transmission system network and has an interconnector business. It also has a key role is delivering government policy, particularly the capacity market, and advises on the level of network investment required.
As a result, over the last few years, there have been calls for the UK to adopt an independent system operator (ISO) model, as used in the US.
Ofgem is now consulting on how National Grid’s role can be made more independent, and ultimately, how a move to the ISO model might work. For now, however, National Grid gets to keep the SO business, a decision it welcomed.
“We believe National Grid is best placed to deliver the role of System Operator, especially during a time when the energy landscape is changing rapidly. The Government and Ofgem have recognised our vast experience and expertise in balancing the electricity system and ensuring the market runs efficiently,” said CEO John Pettigrew.
“We share the same priorities towards keeping customer bills down, increasing certainty, enabling greener energy, and security of supply. We will be working closely with key stakeholders to achieve these objectives while further evolving the independence of the system operator role within National Grid.”
Regardless of structure, the regulator wants National Grid to be more transparent in its system balancing activities, from balancing services procurement to working with distributing network operators (DNOs) and power generators.
Ofgem thinks National Grid should also have a much more active role in industry code arrangements, including charging codes.
Meanwhile, it wants National Grid to work more closely with DNOs so that a longer term, whole system view can be taken as the UK transitions to a smarter grid and smarter energy system.
The regulator now seeks views on its approach. See the consultation document here.
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National Grid retaining the role of Independent System Operator as a legally separate entity is an outcome that delivers the best of both worlds. It should result in an Independent System Operator with the freedom to manage electricity flows how they see fit without putting the brakes on initiatives National Grid already have underway. Innovation is vital to accelerate our transition to a new energy economy but the stability National Grid provides means we will continue to benefit from their considerable expertise successfully managing our changing energy system.