The energy landscape is undergoing a revolution, with changing generation and demand patterns driving the need for substantial network investment in order to reach the UK government's Net Zero Target by 2050.
In this way, Electricity Transmission has a central role to play in delivering reliable and affordable greener power for consumers now and in the future. The introduction of competition to onshore electricity networks has a key role to play in improving efficiency in network investment and driving innovative solutions to network needs, helping us meet our decarbonisation targets at the lowest cost to consumers.
Ofgem published their decision to proceed with the implementation of the early competition model on 28 March 2022. We are now progressing work in preparation to launch the early competition process.
What is early competition?
Early competition is a competitive process to select a bidder a solution or a specific need on GB's electricity transmission system. The process begins "early," prior to the detailed design, surveying and consenting phases of solution development. This means organisations could compete for the design, build and ownership of onshore transmission solutions. Early competition will help encourage new ways of working and aims to seek the best solutions at a fair cost for consumers.
What are we trying to achieve?
Unlocking value for consumers
Competition in network development has the potential to unlock millions of pounds of consumer value by encouraging those who are responsible for transmission assets to use more innovative and cost-effective solutions to meet the needs of the electricity system. The Department for Business, Energy and Industrial Strategy indicate that, through the introduction of competition, consumers could see savings of up to £1 billion by 2050 on projects tendered over the next ten years.
Competitive pressure and involvement of new parties is likely to drive innovation and generate a wider range of ideas for solutions to system needs.
Depending on the tender model there could be innovation in areas such as technology, design, supply chain management, raising of finance and operations.
Effective competitions should be open to as many potential solutions as possible, including proposals from a full range of network (solutions requiring a transmission licence) and non-network solutions (a service or an asset which doesn’t require a transmission licence).
Early competition supports the transition to a carbon-free network
As the ESO leads Great Britain’s transition to net zero, cost savings achieved through introducing early competition will be important in helping drive lower transmission charges and make investment in low carbon generation more affordable or cheaper.
This benefit is particularly important considering the role of the ESO in supporting Great Britain achieving net zero.
We hope that early competition could also encourage sustainability as we are exploring whether this could be part of the criteria for tenders.
What happens next?
We are now in the process of developing the detailed tender process and commercial model, establishing project identification processes, and working with Ofgem to establish the frameworks required to underpin early competition. We are also progressing the modifications to the required industry codes to enable the implementation of network competition. Throughout this timeframe we will work with industry to prepare for the first tender and share developments with stakeholders through appropriate forums. This also includes potential code changes. Ofgem will also provide more clarity on roles and responsibilities.
Webinar: early competition implementation launch
Following Ofgem's decision to implement early competition, our latest webinar sets out our high-level implementation timeframes and discuss our early thinking to our stakeholder approach.
Our early competition project is working with the industry to transform the way Great Britain’s electricity system is designed and built. Find out the latest on phase 3.
At the ESO we have an ambition to enable more competition across the markets that we operate so that, together, we can unlock millions of pounds in consumer value and continue to progress towards Britain's net zero goal.
The ESO has published its early competition plan – co-created with industry partners and experts over 18 months, it proposes a new approach to deliver competition into the onshore electricity transmission network.