Ben Brading 6 min read

NESO: Strategic planning, connection reforms, and balancing for the British energy system

The transition to net zero is making the British energy system more complex. Keeping it secure, reliable, and affordable now and into the future requires careful planning and management.

NESO sits at the centre of this task. It plays a critical role in balancing electricity supply and demand in real time, planning the future grid, and reforming how new projects are connected.

This guide explains what NESO does and why it was created. Here’s what we cover:

What is NESO?
Why was NESO created?
NESO’s role in the British energy system
NESO’s balancing services
NESO’s connections reform

What is NESO?

The National Energy System Operator (NESO) is the government-owned energy system operator for Great Britain.

It is the statutory body responsible for operating the national electricity grid and for providing strategic planning across the entire British energy system, with the objective of ensuring security of supply, affordability, and the transition to net zero emissions.

NESO was formally established and began operating on 1 October 2024.

Why was NESO created?

Before the creation of NESO, the grid operator was called the Electricity System Operator (ESO) and was part of National Grid plc, the for-profit group that owns the high-voltage electricity transmission system.

NESO was created as an independent, publicly owned body, separating system operation from network ownership and investment for the following reasons:

Independence

The now defunct ESO was perceived to suffer from a conflict of interest, as it was incentivised to recommend infrastructure upgrades that would directly benefit National Grid plc.

An independent NESO has strengthened trust, transparency, and legitimacy in planning decisions.

Whole system planning

Before the creation of NESO, planning of the British energy system was fragmented, with electricity, gas, and offshore networks all planned and managed separately.

NESO was granted a whole-system planning mandate to allow it to optimise the entire energy system and manage the rapid changes required to support the decarbonisation of the national grid.

Clear accountability

Decisions regarding the future of the energy system have a major impact on the British population through their effects on consumer bills and the planning process.

NESO was created as a single public corporation responsible for these decisions, with accountability to:

Government (via the Department for Energy Security and Net Zero)
The energy regulator Ofgem
Parliament and the public

NESO’s role in the British energy system

This section explains the three distinct roles NESO has in the operation, planning, and security of the British energy system.

Whole system strategic planning

Applies to: Gas and electricity grids

NESO has a statutory duty to act as the independent, whole-system planner for Great Britain’s energy system.

NESO looks decades ahead to identify the infrastructure needed to meet the rapidly changing requirements of Britain’s energy system.

Here, we explain what this means for Britain’s electricity and gas systems.

Strategic planning for the electricity system

NESO is creating a Strategic Spatial Energy Plan for the grid up to 2050, which encompasses:

The rise in low carbon energy sources, particularly UK wind farms.
Accommodating the rise in demand from EVs, heat pumps, and data centres.
The phase-out of unabated power generation from gas power stations.

Strategic planning for the gas system

NESO performs strategic analysis and forecasting for the future of gas distribution in Britain.

The focus of NESO’s planning is on how the gas system evolves as the UK decarbonises, encompassing:

The declining use of domestic and business gas connections for heating.
The discontinuation of the widespread use of gas in electricity generation.
The increasing production of biomethane from the green gas support scheme.

Ensuring security of supply

Applies to: Gas and electricity grids

NESO has a statutory responsibility to support long-term security of supply by identifying future risks to energy adequacy and resilience, and advising on how they should be mitigated.

NESO must ensure that the future energy system is able to withstand shocks from unplanned plant closures, extreme weather, and geopolitical events.

In the electricity market, NESO operates the Capacity Market, where generators are paid to make capacity available one to four years in the future, ensuring there will be sufficient large-scale generation to meet expected peak demand.

Real time system operation

Applies to: The electricity grid

NESO is responsible for operating the high-voltage national grid in real time. It ensures that electricity is delivered securely and continuously across Great Britain by:

Ensuring the precise real-time balancing of supply from generators against demand from users to keep the grid stable.
Ensuring that the frequency of the electricity system remains at 50 Hz to protect equipment used on the grid and by consumers using mains electricity.
Managing regional bottlenecks in the transmission network to prevent local infrastructure overloads.

To achieve system stability, NESO continuously forecasts real-time electricity demand using weather data, historical trends, and market information to anticipate changes in electricity usage, and then adjusts power availability on the national grid accordingly.

NESO adjusts grid power availability by paying participants in the wholesale electricity market to provide balancing services.

NESO’s balancing services

In its role as grid operator, NESO must strategically add or remove power from the grid to maintain balance.

NESO does not own any generation or storage assets, so it procures balancing services from generators, energy storage facilities, and consumers.

This section explains the key balancing services used by NESO:

The Balancing Mechanism

The Balancing Mechanism is an active market in which participants submit bids and offers to add or subtract power from the grid, with adjustments delivered to the grid one hour after the end of the auction.

Participants submit bids or offers that specify volumes (MWh), prices (£/MWh), and time periods.

NESO selects bids and offers based on the cheapest available services to meet the grid’s requirements. The section below sets out the typical bids and offers made in the market.

Offers to increase power on the grid

An offer is a proposal from a participant to increase the power available on the grid, typically through one of the following:

Increases in generation – Gas power stations can be paid to start up and begin feeding power onto the grid.
Release of stored power – Grid-scale energy storage facilities, or pumped hydro storage facilities, can be paid to feed stored energy onto the grid.
Demand reduction – Energy-intensive commercial users, such as data centres, can be paid to reduce their power consumption.
European imports – Importers can purchase electricity in Europe and import it using an undersea interconnecting cable.

Bids to reduce power on the grid

A bid is a proposal for a participant to be paid to reduce the power available on the grid, typically through one of the following:

Reduction in generation – Flexible generators, such as the Drax biomass power station, can be paid to reduce generation.
Storing excess power – Grid-scale battery storage facilities can be paid to remove and store power from the grid.
Wind curtailment – Wind power stations can be paid to disconnect from the grid to prevent bottlenecks in power transmission.
European exports – Interconnectors with Europe and Ireland can be used by traders to export power away from the grid.

Demand flexibility service

NESO also pays for demand-side balancing through the Demand Flexibility Service, which allows smaller businesses and households to take part in providing balancing services.

The Demand Flexibility Service is used alongside the Balancing Mechanism to help manage short periods of peak stress on the grid. Participants are paid to reduce consumption during specific grid-stress periods, with NESO providing around six hours of advance notice.

Find out more in our guide to how businesses can participate in the Demand Flexibility Service.

Frequency response service

The frequency response service is NESO’s mechanism for maintaining second-by-second frequency stability on the grid.

Through the frequency response service, battery storage facilities provide automatic, second-by-second imports and exports that keep the grid’s frequency stable.

Find out more in our guide to battery storage facilities in the UK.

Balance reserve

The balance reserve is NESO’s scheme used to ensure a reserve of back-up power on the grid, maintaining supply during unexpected increases in demand or sudden losses of generation.

NESO makes purchases in the day-ahead wholesale electricity market, paying participants to maintain an available reserve of power but not feed it into the grid unless instructed by NESO.

A prominent example of a regular participant in the balance reserve scheme is the Dinorwig pumped hydroelectric facility in North Wales, which stores water at a high elevation and releases it to generate electricity when requested by NESO.

NESO’s connections reform

NESO’s grid connection reform is one of the first major system-wide reforms delivered under its new mandate and is already impacting the British energy system.

NESO’s connections reform was approved by Ofgem in 2025, and as of early 2026 NESO is in the process of implementing it. This section explains what NESO changed and why.

Problems with the old first come, first served, connection queue

Before the reform, new connections to the grid operated on a queue-based model.

Developers of new generators, energy storage facilities, and businesses could easily apply for a grid connection with National Grid or a regional distribution network operator.

The grid operator would offer future connection dates using a queue system, with new connection dates scheduled after all existing connection requests.

New connections often require network reinforcement work, meaning that the queue would naturally stretch over many years. This led developers to submit speculative applications to secure a place in the queue before securing funding or planning consent for their projects.

At the time of the reform, the queue for connection dates had stretched decades into the future, with viable development projects blocked by speculative applications.

The queue was slowing down the development of renewables required for decarbonisation and was causing inefficient grid upgrades.

What NESO’s connection reform changed

NESO introduced tougher requirements for projects in the queue, mandating that they demonstrate land rights, planning progress, and financial commitment. Projects that could not meet these requirements were removed or deprioritised.

Secondly, the shortened queue was reordered based on the needs of the overall energy system, with connections assessed according to:

Location on the network
Contribution to security of supply
Alignment with net zero
Interaction with offshore wind, storage, and demand

Aims of NESO’s connection reforms

NESO’s connection reform is already delivering the following benefits to the electricity grid and consumers:

Faster connections for projects that enable decarbonisation – Priority is given to projects that actively support decarbonisation, helping to steer the energy system towards the government’s Clean Energy 2030 target.
Improved grid flexibility – Priority is given to connections that enhance the flexibility of the energy grid, helping to reduce the cost of NESO’s balancing services and the BSUoS charges used to fund them.
More efficient network investment – Network reinforcement work is carried out only for credible projects, lowering DUoS and TNUoS charges for all consumers.

How NESO is governed, funded, and regulated

NESO is designed to be publicly owned, operationally independent, and tightly regulated. Here, we explain each of these elements.

Governance: Ownership and management

NESO is a public corporation, wholly owned by the UK Government via the Department for Energy Security and Net Zero (DESNZ). This means it does not have shareholders who set the organisation’s priorities.

NESO has an independent board of directors that is responsible for strategy and oversight.

Funding of NESO’s activities

NESO is not funded through general taxation and does not earn commercial profits.

NESO is funded through regulated charges on domestic and business energy suppliers operating in the retail energy market. These suppliers ultimately pass the cost of NESO’s activities on to end consumers through domestic and business electricity prices, and domestic and commercial gas rates.