Mark Cox, head of nuclear and wholesale, and Mark Williams in the strategy and policy team at EDF have been sharing their, and their company’s, thoughts on constraint costs.

As Government prepares the next stage of Reformed National Pricing (RNP), the authors argue that constraint costs are a growing challenge, increasing electricity bills and undermining confidence in the rollout of renewables.

Constraints arise when the grid cannot move enough electricity from where it is generated to where it is needed, but the cost of these constraints has risen, reaching £1.7bn in 2024/2025, up from around £0.5bn per year before 2020, driven by higher gas prices and by more renewable generation coming online in constrained parts of the country, especially Scotland.

Costs may, of course, settle at this new elevated level, or they might keep climbing. NESO has produced forecasts that show constraint costs continuing to grow, peaking at over £7bn in 2030, but the trajectory on constraints keeps changing making any predictions difficult, and a gamble.

Data from 2025 suggests that constraint costs are not increasing as rapidly as NESO forecast. Under their Net Zero pathways, NESO forecast constraint costs of between £2.6 and £4.2bn in 2025. In practice, the outturn figure was £1.8bn, which is higher than recent years but does not represent the forecast acceleration.

This does not mean that constraints are no longer a problem. but the nature of the challenge over the rest of this decade now appears different.

The recent Allocation Round 7, and the AR8 auction expected later this year, connections reform, Grid reinforcements and volatility of commodity prices (gas and carbon in particular) have upset predicts, as could diversification of the Grid as proposed by the Tony Blair Institute (see earlier item).

The authors therefore call on NESO to support planning and policy development by providing updated constraints forecasts and provide an official view of the optimum level of constraints: the balance to be struck between constraints that increase balancing costs and investing in transmission infrastructure which increases network costs.

We should seek to build a system that leads to the balance that minimises overall system cost to consumers, and NESO is in the best position to suggest what that is.

This guidance will enable Government and the sector more widely to ensure that the next stage of Reformed National Pricing works best for the system and the level of constraints we are now likely to have given recent developments, rather than enacting reforms based on out-of-date assumptions.

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