NOA methodology

We use the relevant set of scenarios as required by Electricity Transmission Standard License Condition, C11, as the basis for each annual round of analysis. These provide self-consistent generation and demand scenarios which extend to 2050.

The NOA process utilises the scenarios, as well as the contracted position, to form the background for which studies and analysis are carried out. The total number of scenarios is subject to change depending on stakeholder feedback received through the FES consultation process. In the event of any change, the rationale is described and presented within the FES stakeholder feedback document that is published each year.

FES 2021 retains the scenario framework introduced for FES 2020 which reflects the UK net zero emissions target for 2050.

For more information on the NOA scenarios, please consult the FES 2021 document, page 6.

For every boundary, the future capability required under each scenario and sensitivity is calculated by the application of the NETS SQSS chapter 4 - economy and security planning methodologies. 

We use the scenarios and the criteria stated in the NETS SQSS to produce the future transmission boundary requirements. The market simulation tools are used with the new scenarios and previous NOA recommendations to calculate projections of boundary power flow distributions and future network constraints. We then publicise these capability requirements and estimates so the TOs and Interested Persons can identify future transmission options.

More information regarding transmission requirements is published in the ETYS.

Potential transmission solutions to relieve thermal, voltage or stability constraints can be categorised into build options, operational options and reduced-build options.

Build options cover the breadth of asset improvement such as replacing circuit conductors (in overhead lines or underground cables), reconfiguring substation layouts to improve loadings through to new build such as new substations or circuits.

Operation options are based on buying services, typically from generation for instance to rapidly drop output which could be by intertrip, or by capping generation outputs. This would be for controlling thermal constraints.

Reduced-build options involve some capital outlay but less than an asset-hungry project based on primary plant. These might be based on control schemes or “light current” works, or re-tensioning overhead lines to reduce sag for higher thermal loadings.

We go into more detail in table 2.2 - potential transmission solutions in section 2 of our NOA methodology.

Each year, the ESO and TOs complete boundary capability assessment studies to feed into the cost-benefit analysis process. The TOs submit the results of their own boundary studies. We also perform studies of the same boundaries as the TO for the purpose of verification. We will use the latest information that the TO has provided to study reinforcements.

Thermal loading, voltage and stability boundary limitations are assessed to find the maximum boundary power transfer capability. The boundary capability is the greatest power transfer that can be achieved without breaching any NETS SQSS limitation.

The analysis is done in accordance with the ETYS/NOA study guidelines which describes the constraint type, scenario, season and the years for the network assessment.

Cost-benefit analysis compares forecast capital costs and monetised transmission benefits over the project’s lifespan, in order to provide an investment recommendation. Our cost-benefit analysis investigates the economic benefits of different combinations of reinforcement options across four future energy scenarios. We identify the single combination that provides the most value for the consumer.

Since the number of transmission system reinforcement options proposed is quite large, the country is split into regions and each option is allocated to one of the regions. The cost benefit analysis process for each region is conducted in isolation. Generation background applied to the CBA is all four FES scenarios. Each scenario is studied in isolation. The option that has been selected to be evaluated is activated in the constraint cost modelling tool at its earliest in-service date. The present value of the base case (no reinforcement option) is then compared to the present value of the reinforced case plus the amortised present value of the capital costs to give the net present value (NPV) for this option.

We repeat the process to build up chains of reinforcements and the outcome of this process is a list of reinforcement options, for the current region and scenario, and the optimum year for each. This is referred to as a ‘reinforcement profile’.

Least worst regret (LWR) analysis is a decision making tool that makes recommendations based on which options produce the least ‘regret’ across all scenarios analysed. The regret of an investment strategy is the net benefit difference between that strategy and the best strategy for that scenario. So, under each scenario, the best strategy will have a regret of zero, and the other strategies will have different levels of regret depending on how they compare to the best strategy. We always choose the strategy with the least regret across all scenarios.

We assess the options with a "proceed" recommendation against Ofgem's criteria for eligibility for competition.

We select options based on the results from the CBAs, considering what capability the options bring, what constraints are relieved and the cost of build/maintenance.

The NOA process output recommendations are described below:

• Proceed: This option is critical to our future planning. Investment should be made in the next financial year to ensure the option’s earliest in-service date remains on course.
• Delay: At this time, it is not economically viable to proceed with this project. The option’s delivery should be delayed by one year.
• Hold: This option is important and required in future, however due to the lead time in delivering this option, no investment is required this year. Therefore, this option can be delayed by at least one year.
• Stop: This option is not currently required in our future plan, delivery should be stopped and not be continued.
• Do not start: This option is not currently required in our future plan, delivery work should not begin.

During each year’s NOA, the NOA committee provides additional scrutiny throughout the NOA process. NOA committee members bring expertise from different parts of the ESO, including knowledge on operability challenges, network capability development, commercial operations and insight into future energy landscapes to ensure that the NOA recommendations are robust and in the best interest of GB’s consumers. The NOA committee focuses on the recommendations for marginal options which are those supported by only one FES scenario or sensitivity.

You can find the latest meeting minutes as well as the terms of reference.

We are responsible for producing the NOA report, but the form of the report is subject to consultation and also to Ofgem approval.

The NOA report presents the relevant information to communicate the investment recommendations which are in the best interest of consumers whilst maintaining appropriate commercial confidentiality. It also includes NOA for interconnectors, competition assessment outcomes, offshore wider works, and stakeholder engagement.