National Grid sells ESO in £630m deal

The UK government has acquired the Electricity System Operator from National Grid to form a new public entity, the National Electricity System Operator (NESO).

The deal is valued at £630 million ($827.8 million).

Set to start work on 1 October 2024, the National Energy System Operator (NESO) will be chaired by former E.ON CEO Dr Paul Golby, with Fintan Slye, former CEO of EirGrid, as the chief executive officer.

The new publicly owned NESO will be independent of National Grid and help connect new generation projects to the UK power network, working alongside Great British Energy to deploy renewable energy.

Currently, there is no single body responsible for overseeing the strategic planning and design of the country’s electricity and gas networks.

NESO will fill this gap in the UK, aiming to break down the siloes which currently exist between the planning of electricity and gas systems, with independent oversight for the design of all Great Britain’s energy networks.

Commenting in a release was Paul Golby, chair of the National Energy System Operator:  “This is a pivotal moment as we head closer to the launch of the National Energy System Operator on 1 October. NESO will support a more integrated and coordinated strategy to meet the unprecedented challenges of climate change, ensuring security of energy supply and keeping bills as low as possible.

“NESO brings together critical roles and responsibilities under one roof, creating an environment that is essential for success. We will have a broad strategic oversight of both the electricity and gas systems, managing system planning, market operations and ensuring that our energy infrastructure is secure, resilient, flexible and future-proof.”

The government’s Mission Control – headed up by Chris Stark – has already given NESO one of its first tasks – commissioning it to provide advice on how the UK will hit its goal to deliver clean power by 2030.

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NESO: A brief background

NESO’s formation dates back to 2022 when, following industry consultation, Ofgem and the UK government decided that the country needed a new, independent organisation that would take a whole system approach to the energy and power sector.

In October 2023, the Energy Act 2023 was passed, legislating for a Future System Operator (FSO) to be created. In January this year, the ESO announced the new name for this entity as the National Energy System Operator.

Under the Energy Act 2023, NESO says they will take a cross-sector approach to planning the country’s energy system, looking across electricity, gas and hydrogen, as well as renewable generation, storage and other emerging technologies like carbon capture usage and storage.

The independent organisation will map out the country’s future energy networks – helping both the government and Ofgem make informed decisions when considering new infrastructure.

Said Jonathan Brearley, chief executive of Ofgem: “The setup of NESO is a huge step forward in ending Britain’s exposure to volatile energy markets and getting clean, renewable power to every single one of us.

“Its work is central to long-term energy security and to running the system day to day. We look forward to working with NESO to ensure Britain gets the clean power system it needs at the lowest possible cost to consumers and taxpayers.”

The enterprise value of £630 million that the government has agreed to pay National Grid to acquire the ESO will be subject to customary closing adjustments.

The majority of taxpayer costs, says the government, will be recouped via existing charges on energy bills, which previously would have gone to National Grid.