ESNZ questions NESO, National Grid, Octopus, Eon and more on the “constraint costs” adding £8 billion to our energy bills by 2030
When record-breaking heatwaves like Britain has experienced in recent weeks hit, there is sudden huge, simultaneous demand on the electricity grid across the country, as people switch on air-con and newly-bought fans.
Constraint costs arise when there is insufficient network capacity to transport electricity from where it is generated to where it is needed. In these situations, the National Energy System Operator (NESO) balances the system by paying some generators to reduce output and others to increase generation elsewhere. These turn up and turn down actions cost money, and how much depends on the volumes involved.
In the second session of its inquiry on Reviewing the electricity market, the Committee turns to the growing constraint costs of managing congestion on Britain's electricity network, and whether Government reforms will reduce the burden on consumers.
Meeting details
While some level of network constraint is an unavoidable feature of an efficient electricity system, evidence submitted to the Committee suggests current costs are significantly higher than necessary, with infrastructure investment delivery by transmission operators 32% below planned levels between 2013 and 2021.
Today, NESO’s re-dispatch actions can at times account for more than 50% of national electricity demand. Congestion management costs have risen eight-fold since 2010 and are projected to be adding up to £8bn on consumer bills per year by 2030 unless critical network projects are brought forward.
Will the Government’s Reformed National Pricing plan reduce these constraint costs?
Or are further operational and market changes needed to improve how the system is balanced in real time and how costs are allocated?