Partner London
"The Report sets out two primary pathways to achieving a clean power system: (1) New Dispatch; and (2) Further Flex and Renewables."
NESO acknowledges that achieving this aim is a huge challenge that will come at a cost of £40bn or more annually, but one that is feasible. It will require significant change, investment and a collective effort across the energy sector and beyond.
The Report explores how Britain’s power system has developed in recent years, providing the clean power building blocks, and how this development will need to be accelerated to achieve clean power by 2030, setting out two ‘pathways’ that could be pursued, both of which place emphasis on our existing foundations in renewable power sources. This article sets out the strategic aims of NESO, the key findings of the Report and how it could impact on the energy sector more broadly.
Who is NESO?
NESO was created under the legislative framework of the 2023 Energy Act, which provided for the creation of an independent electricity (and gas) system planner and operator, that would be tasked with facilitating the acceleration of Britain’s energy transition. It replaced the Electricity System Operator which had existed under the National Grid umbrella.
Central to NESO’s mission is a “whole system approach” to clean power, providing strategic advice to the Government with three key objectives in mind: (1) Net Zero; (2) efficiency and economy; and (3) security of supply.
What is clean power?
The Report describes clean power sources as renewables, biomass, nuclear, carbon capture and storage plants and hydrogen produced from low carbon methods. Setting out what NESO considers “core elements of a clean power system”, the Report looks at ways of coordinating delivery at pace in key areas, including electricity demand, system flexibility and connections.
The Report explains that a clean power system for Britain is one where more power than it consumes is generated from clean power sources. In practice, this means that 95% of Britain’s power will be generated by these clean power sources, with up to 5% being generated by unabated gas (i.e. gas without carbon capture and storage), to be used only when essential. With this in mind, the Report considers the benefits and drawbacks of different electricity sources, such as weather dependent renewables (for example, wind and solar) coupled with firm generation sources (for example, nuclear), to supplement the system.
Two ‘pathways’ to clean power
The Report sets out two primary pathways to achieving a clean power system: (1) New Dispatch; and (2) Further Flex and Renewables.
Both pathways follow the same basic blueprint to achieving clean power by 2030: an expansion in the energy system’s flexibility of both demand and supply, an increase in power production from wind and solar, and retention of our existing gas fleet, to ensure security of supply – but the means of achieving this differ between the two, as explored in more detail below.
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"The Report specifies that delivering a clean power system by 2030 will require an installed generation and storage capacity of approximately 210–220 GW."
New Dispatch
Under the New Dispatch pathway, power production from renewable energy sources (onshore and offshore wind and solar) will increase, but emphasis will be placed on the creation of new dispatchable plants (totalling 2.7GW, using a mixture of hydrogen from low carbon sources or carbon capture and storage).
Some other key features of this pathway include:
- it will utilise Britain’s highest nuclear capacity, providing security of supply whilst seeing a reduction in the share of unabated gas;
- supply chain pressure on the wind and solar industries will be relieved compared to the Further Flex and Renewables pathway (given that under New Dispatch, offshore wind capacity will only need to expand by 9 GW over the next one-to-two years, compared to 19 GW under the Further Flex and Renewables pathway); and
- it will be slightly lower cost, owing to (1) reduced investment in renewables and storage and (2) the ability to match dispatchable generation to demand.
Further Flex and Renewables
Under the Further Flex and Renewables pathway, expansion of renewable energy sources will be prioritised, with particular emphasis being placed on offshore wind (totalling 50GW by 2030).
Some other key features of this pathway include:
- it will require the highest level of societal engagement with residential and industry demand flexibility;
- lower overall fuel costs, but more power must be produced overall to compensate for curtailment, constraints, higher exports and storage losses (given the greater share of generation from variable sources); and
- greater storage capacity will be required.
The Report specifies that delivering a clean power system by 2030 will require an installed generation and storage capacity of approximately 210–220 GW. Achieving this, following either pathway, will require a dramatic acceleration in progress compared to anything achieved historically.
"To deliver clean power by 2030, the record amounts of new renewable capacity that will need to be delivered, alongside reforms to the planning process and major grid enhancements all present significant opportunities to the energy sector as a whole."
Both pathways seek to provide stability for businesses and confidence for investors by giving developers greater route-to-market certainty through a clear national plan and reforming our planning and grid connections processes. Each pathway would reform electricity markets while ensuring a stable and attractive investment environment and securing £40bn+ of investment annually to 2030.
Challenges
Each pathway brings its own challenges. New Dispatch would involve new technology, higher upfront costs and government support to get off the ground. It would also leave the energy system more exposed to volatile international gas prices, as gas would still be used in 47% of periods, compared to 15% under Further Flex and Renewables.
Further Flex and Renewables would require expansion of offshore wind on an unprecedented scale and requires more power production overall to compensate for curtailment, constraints, higher exports and storage losses.
Additionally, delivering a clean power system by 2030 will put pressure on existing challenges around grid connection. Without grid expansion, it will not be possible to fully utilise renewables, and gas will fill the gap. As such, significant reform is needed to ensure connection to the grid does not create a roadblock to clean power goals. Since publishing the Report, NESO has set out its plan to implement grid connection queue reforms, by which projects will be categorised as ‘Gate 1’ or ‘Gate 2’ projects. To enter Gate 2, projects will need to demonstrate that they are (i) ready and (ii) needed, before being assigned a place in the queue. These reforms, which aim to reduce the grid connection backlog, should facilitate the transition to clean power, as set out in the Report.
In practice, the combined higher levels of offshore wind in the Further Flex and Renewables pathway and new dispatchable power in New Dispatch will both be needed soon after 2030. For the government, going forward, an appropriate approach may therefore be to aim high on both, reducing the risks of under delivery for the portfolio as a whole and reducing reliance on any single project.
To deliver clean power by 2030, the record amounts of new renewable capacity that will need to be delivered, alongside reforms to the planning process and major grid enhancements all present significant opportunities to the energy sector as a whole.
Key contacts
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