New energy system will lead to big cuts in energy bills – but not until 2030

Martin Shipton

A revamped energy grid is expected to deliver £58.5m savings on electricity and gas consumer bills in Wales – but the price cuts won’t kick in until 2030, it has been revealed.

Since October 2024, the National Energy System Operator (NESO) has been the nationalised energy system operator for the UK. Previously owned by National Grid plc, when it was known as National Grid ESO, it is a publicly owned organisation which operates both the electricity transmission and gas distribution systems.

When the buyout from National Grid was announced in September 2024, the company was valued at £630m.

NESO has been set up as the Independent System Operator and Planner (ISOP) under the provisions of the Energy Act 2023, and was previously known informally as the Future System Operator (FSO) prior to the announcement of its official name.It holds the licences for operating the electricity system and for planning the gas system.

Renewable energy

NESO is expected to work closely with Great British Energy to accelerate the deployment of renewable energy in the UK.

Over the next four years, an innovative “digital twin” of the entire Welsh energy system will be developed. This cutting-edge project will accelerate the delivery of generation, bolster energy security in Wales and is projected to deliver £58.5m worth of savings on consumer bills between 2030 and 2035.

The project, Pweru Cymru yn adnewyddol (Powering Wales Renewably, PWR), is bringing the Welsh Government, whole energy system users, and network operators together to develop a digital twin of Wales’ energy system to benefit Wales through improved system efficiency. In September 2024, the project received Beta phase funding from Ofgem’s Strategic Innovation Fund. Since then, NESO has started the groundwork to develop a working prototype.

Over the next four years, delivering a digital twin – a virtual replica – of the entire Welsh energy transmission and distribution systems, including electricity and gas transmission and distribution networks will allow NESO to identify where the best places are to locate renewable energy generation.

Speeding up the delivery of renewables in Wales will, says NESO, benefit the economy and improve the resilience of energy in Wales, allowing the nation to become more dependent on locally generated energy.

Data sharing

During this period, NESO expects to make significant progress in digitalisation and data sharing across the industry to maximise benefits for stakeholders and align it with NESO’s Virtual Energy System programme – a digital replica of the whole of Great Britain’s energy system.

The project is designed to deliver a range of benefits, including cost savings on energy bills of £58.5m between 2030 and 2035 for consumers, improved energy security and a reduction in up to two million tonnes of carbon emissions associated with electricity generation to improve air quality for Welsh communities.

It also aims to reduce the cost of operating the network by reducing flexibility costs and avoiding curtailment costs (typically associated with there being too much wind or solar on the system to make use of), as well as annual cost savings for users of network services through improved network capacity utilisation.

PWR could also help reduce energy bills by lowering Transmission Network Use of System (TNUoS) charges, which are the costs for the installation, operation and maintenance of Britain’s electricity transmission network, paid by large generators and electricity suppliers, but often passed onto their customers.

A statement issued by NESO identified six ways is which cost savings could be delivered on energy bills for consumers:

Increased renewable generation:

PWR targets delivery of this benefit based on the incremental increase in renewable generation enabled by increasing the proportion of successful connection applications. In doing so, PWR will contribute to the innovation required to achieve the challenging decarbonisation targets set by the Welsh Government.

By satisfying a greater proportion of Welsh electricity demand from lower cost renewables, the average electricity cost per unit will be reduced. In a well-functioning market, these savings will flow to consumers via their bills.

One of the key elements in the Welsh energy plans is to increase Welsh ownership of renewable generation including community energy, and smart local energy systems. The existing renewable generation trajectory has significant challenges due to network constraints, low application acceptance ratios, and subsequent attrition of accepted applications in the connections queue.

Flexibility Cost Reduction:

Greater coordination through visibility of all network operator requirements for energy and capacity flexibility, and that available, at a portfolio level is targeted by PWR to yield cost reduction and efficiencies. Flexibility coordination will rationalise overlapping transmission and distribution flex requirements and enable the selection of the most suitable DER response site considering location, characteristics, and track-record of dispatch delivery.

Value of Avoided Curtailment:

PWR is aiming to reduce curtailment and realise curtailment cost reductions through developing constraint off-setting, storage location selection, and the interaction between procured flex, Active Network Management (ANM), and curtailment limits.

In addition, a secondary, consequential benefit is a greater contribution from renewable generation output contribution to meeting Welsh electricity demand, through the extra renewable generation enabled; this benefit has not been financially quantified within the Cost Benefit Analysis.

Demand Decarbonisation CO2 Savings:

PWR will enhance CO₂ savings through the additional renewable generation achieved due to the project replacing fossil fuel generation. The carbon intensity of existing electricity generation in south Wales is frequently relatively high, offering scope for CO₂ reduction.

Enhanced Network Capacity Utilisation:

PWR targets enhanced utilisation of existing and new network capacity. The benefit delivered by PWR is expressed as a financial saving against projected business plan load related network expenditure. PWR delivers this benefit through developing constraint off-setting, storage location selection, and the interaction between procured flex, ANM, and curtailment limits.

Achievement of Welsh 2035 Electricity Decarbonisation Target:

Wales’ decarbonisation trajectory requires innovation to achieve its 2035 target. Present progress is being hindered by network capacity availability and poor alignment of top down and bottom-up plans with the network work development and connection queue.

Not achieving the 2035 target will lead to negative climate impacts, additional post deadline costs, and the potential for litigation from environmental pressure groups / individuals and associated penalties.

Avoidance of these consequences can be seen as a qualitative benefit of PWR.