ESN response to NESO feedback request on repetitive retrading options

TheElectricity Storage Network (ESN) has responded to NESO's storage behindconstraints feedback form, part of the operational review into the repetitivere-trading of storage assets.

ESN members are increasingly concerned that this review and several other significant market reforms are being developed in isolation, despite their combined impact on storage projects. Taken together, reforms to national pricing, locational procurement, network charging, CMP470, BSC P462 and repetitive re-trading solutions could fundamentally reshape the commercial and operational environment for storage, and window one LDES projects in Scotland will be particularly exposed.

A holistic approach to reform

Without a coordinated approach, ESN believes there is a real risk that individual reforms create conflicting investment signals, increase complexity and lead to unintended consequences that undermine confidence at a time when rapid deployment of storage is essential to meet Clean Power 2030 targets. ESN is calling on DESNZ, Ofgem and NESO to undertake a holistic review of the policy and market framework for storage, assessing how these reforms interact and establishing a clear direction for implementation.

Assessing the costs and benefitsof storage

ESN also highlights the need for a holistic approach to assessing the system and consumer benefits, as well as the costs, of storage projects. This differs from the siloed NESO analysis in the Reformed National Pricing call for input and the storage behind constraints workshop, which focuses solely on repetitive re-trading costs. ESN is calling on NESO to establish a more balanced approach to assessing the costs and benefits of storage behind constraints.

Impact on Longer Duration EnergyStorage

The options under consideration have a disproportionate impact on Longer Duration Energy Storage projects, given that the majority of the relevant capacity in Ofgem's minded-to decision is based in Scotland. If some of the options are implemented, projects could sit at the floor level more often, increasing costs for consumers through additional floor payments. ESN is calling on NESO to ensure this impact is included in any repetitive re-trading option decision-making.

Option 3A

ESN members do not support Option 3A. Its only strength is the ease and speed of implementation, but NESO has not provided sufficient evidence that it would reduce the cost of repetitive re-trading, and members are concerned it could increase overall costs and carbon emissions through additional curtailment of wind generation. ESN is calling on NESO to disregard Option 3A as a short-term option for repetitive re-trading.

Option 3AA and the path to anenduring solution

Member sentiment favours Option 3AA over Option 3A, as it is seen as more proportionate and equitable. However, ESN does not believe there is enough support to recommend it as an option to take forward. ESN is instead calling on NESO to prioritise an enduring solution, assessed through a transparent cost-benefit analysis, rather than short-term or interim fixes. Storage projects are financed under multi-year floor and toll agreements, and a stop gap arrangement introduces regulatory uncertainty at a crucial time for deployment.

Enduring options and locationalprocurement

Of the enduring options, Option 6A, the Capacity Reserve Market, is the front runner based on ESN's initial member engagement, reflecting broader sector support for open, competitive, market-based solutions. Views on Option 4B, GTMA Schedule 7A Expansion, are more mixed. ESN also highlights accelerating the locational procurement of response and reserve services as one of the few near-term measures with genuine cross-industry support, and is calling on NESO to take this forward.