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21 Jan 2022

National Grid ESO overhauls market settlement

National Grid ESO overhauls market settlement
Image credit: Getty-82463488, Courtesy of National Grid UK

National Grid Electricity System Operator (ESO) has had to adapt its balancing settlement system to cope with the complexities of the increasing balancing requirements of a renewable energy-based grid coupled with the growing number of balancing parties and shortening settlement periods.

As the Electricity System Operator for Great Britain, National Grid ESO operates on a massive scale – the suppliers and distributors the organisation works with support more than 28 million meters and it settles £4.5 billion ($6.2 billion) annually.

As the smart energy market continues to transform the industry across the UK and Europe, the ESO is dealing with significant changes.

With the new requirements to settle energy imbalances in shorter settlement periods, it must be prepared to manage massive changes in data volume and granularity.

Additionally, the ESO must be able to continue balancing the grid with an increasingly diverse and abundant array of renewable and low-carbon suppliers entering the market.

Among the major shifts in energy markets globally, decreasing settlement periods are, in effect, promoting increased adoption of renewable energy and the promise of a clean energy future. The increasing granularity of power dispatch and settlement financial periods is allowing better and more efficient use of flexible renewable energy sources on the grid in a manner that promotes the security of supply.


Over recent decades, the interplay of these forces has required system operators like the ESO to rethink their approach to balancing actions as the complexity of the market outpaced the capabilities of balancing systems.

Furthermore, regulatory policy changes continue to place additional stress on the ability to balance the system. This requires agility to comply with changing policies – agility that simply does not exist in the balancing systems used in the past.

National Grid ESO’s legacy balancing system for ancillary services was originally built at the turn of the millennium when the UK energy market wasn’t nearly as complex as it is today. The system was extended over the years with both new balancing services to accommodate market changes and additional support such as external reporting tools. The resulting patchwork system had become complex and obtaining accurate settlements results required significant processing.

As UK energy imbalance settlement windows became shorter and shorter, it became clear that the system would soon be unable to cope with the volume and complexity of increasingly granular data. Additionally, there were concerns that the legacy system could compromise the ESO’s regulatory compliance obligations.

The ESO sought a new way forward, with a modern system that would meet its needs now and in the future.

The relative lack of flexibility in the system was making it difficult and expensive to adapt to new market demands as a result of changing generation, transmission, storage and consumption behaviours.

The ESO sought a new way forward, with a modern system that would meet its needs now and in the future, as the market continues to evolve.


Traditionally, energy providers have had limited choice but to turn to highly customised, rigid, and inflexible systems for market settlements to meet regulatory demands. Updating that technology to evolve with market changes comes with a heavy price tag.

The ESO chose to implement a modern Market Settlements Management system designed to flex with fast-changing global energy markets, so the company can continue focusing on evolving business needs, without being hampered by costly, custom IT projects.

The ESO’s modern approach provides a highly configurable platform with a robust toolkit, which allows it and its partners to build out business solutions effectively without application or vendor lock-in.

With the new market settlements approach in place, the ESO will build on the strength of its energy imbalance settlements programme with unprecedented visibility into the settlements process, along with data insights, load modelling and automation.

The ESO will now be able to take on the extreme volumes of data as settlements transactions become more granular and complex. The tested and trusted calculation engine gives the ESO confidence in the financial output of its settlements processes, and the solution integrates with the existing billing system, avoiding the need for a full replacement.

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