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.
We talk to Hannah Kirk Wilson, Network Competition Senior Manager, about the benefits, what it means for industry and how it impacts the ESO.
What’s the Early Competition Plan and how did it come about?
Back in May 2019, Ofgem asked us to look into developing proposals for a model of competition into the design, build and operation of onshore electricity transmission solutions – an early competition model. They wanted it developed with stakeholders with the aim of encouraging more innovation and ultimately better value for consumers.
Essentially, the Early Competition Plan is an alternative delivery mechanism to the current RIIO-model for solutions to new transmission needs. Currently the relevant transmission owner (TO) designs, builds, commissions and operates new assets in response to transmission system needs.
As such, introduction of early competition could mean a significant change. Rather than TOs delivering asset solutions to transmission needs, there’ll be opportunities for other participants to compete to deliver appropriate solutions. This could be building transmission solutions or provision of services, to meet identified needs.
What does the plan aim to achieve?
If approved by Ofgem, it should see new market entrants bring innovation and design ideas that compete to improve outcomes for consumers.
A lot of project costs are set in the early design stage – and by introducing competition at this early point, participants can influence and shape how it’s delivered. There’s also greater scope for innovation across the whole project lifecycle, potentially resulting in lower bills than otherwise would be the case.
In our proposals, we’ve recommended that TOs ringfence bidding teams to enable them to bid alongside new participants and create a fair and level playing field. The winner of the competition could either win a contract for a non-network solution or a transmission licence.
How could the plan impact the role of the ESO?
Potentially we could have a number of new roles to facilitate the early running of competition, as well as changes to our existing roles. There are also new capabilities that the ESO doesn’t currently undertake. For example, in taking on the Procurement Body role we would need to expertise in a wide range of areas, including infrastructure procurement, commissioning and legal knowledge.
Stakeholder engagement in numbers - We’ve held more than 60 workshops, four webinars, 55 bilateral meetings, created four podcasts, published 14 newsletters, one thought paper, two consultations – and now our final submission to Ofgem.
Who did the ESO involve in the process?
It was very much a stakeholder-led effort. We had a small core internal team who worked with the incumbent TOs and service providers from the outset. We also worked with distribution network owners, the investor community, debt providers, stakeholder challenge groups, technology providers to name a few. And of course Citizen’s Advice, which advised on behalf of consumers.
Although we know our proposals will not suit all our stakeholders, we’ve been transparent in our decision making and have been held accountable by the ESO Networks Stakeholder Group – formed from industry specialists whose sectors may be either directly or indirectly impacted by the introduction of Early Competition.
It’s been a real team effort. I’d like to say a huge thank you to all those who’ve taken the time to engage with us. It’s been critical to developing our thinking and shaping where we’ve ended up.
An Ofgem decision on the ESO plan is expected autumn 2021, with earliest competition launch in 2024. For more information, visit our early competition plan section on the ESO website.