This project will develop a whole‑energy‑market impact analysis model that equips NESO with the capability to trace consumer energy costs across the electricity and gas markets and understand the interactions among the key entities involved. The model addresses a current capability gap, as existing NESO tools do not provide an integrated view across power and gas, limiting NESO’s ability to evaluate consumer value, system resilience, and security of supply implications. Lessons learned from this project will enhance NESO’s capacity to understand and assess distributional impacts and support more informed future NESO’s actions and policy recommendations.
The project development will involve targeted engagement across key internal functions and selected external partners. Expected outputs include a feasibility study and prototype model demonstrate feasibility and scalability.
Benefits
The outcomes of this project will deliver benefits from the following four perspectives:
- Capability: visibility of the entire transaction flow and the interrelationship between entities in the whole energy market (electricity + gas market).
- Consumer value impact and empower decision-making: the developed model would allow NESO teams to understand and visualise how actions and policy suggestions could impact consumers. Also, would enhance understanding of the transaction flows from consumer bills to final recipients and the interactions among key entities in the energy market
- Adaptability: The developed model is both adaptable and responsive, ensuring that it can continue to provide valid results by allowing for adjustments to inputs under future market design options.
- Efficiency gains: This model could better support NESO in visualising and analysing the potential effects of various policies on consumer bills.
Learnings
Outcomes
WP 1 – Not published
WP 2 and WP 3 – The following is under review
- Clear and well structured methodology report for entity selection based on the designed selection criteria for power and gas market.
- The methodology is validated through stakeholder engagement.
- Clear and accurate modelling methodology for transaction flows and inter-entity dynamics for power and gas market.
- The modelling methodology can support future exploration of system-dynamics.
- The modelling methodology is assessed for its ability to capture feedback loops, time lags, and behavioural responses to market signals or policy changes, as well as its adaptability to future market reforms.
WP 4
Expected:
- Develop an agent-based market modelling methodology that links the power and gas sectors through shared agents and transaction flows, while capturing cross-sector interactions.
- The modelling methodology should clearly demonstrate how it manages the trade-off between computational load and outcome granularity, while proposing appropriate cloud-scaling strategies.
WP5
Expected:
- Identify key risks based on lessons learned from the previous four work packages (WPs).
- Explore and develop mitigation strategies for the identified risks through a range of approaches, including trialling alternative methods, engaging with relevant NESO teams and industry experts, and applying different data processing techniques.
WP6
Expected:
- Develop a small-scale prototype that models a representative cross-section of the power and gas markets.
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The prototype should include a range of entities, spanning conventional market actors, financial and regulatory stakeholders, service providers, and infrastructure participants.
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The prototype will simulate realistic transaction flows and interactions within a manageable and testable scope.
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An agent-based modelling framework, using a limited number of time steps and synthetic demand and price data, should be applied.
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Appropriate validation metrics should be identified to support evaluation of the prototype.
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Outputs will be cross-checked against historical events and reviewed by subject-matter experts. The validation process will assess the coherence of interactions between agents and evaluate whether the prototype supports parameter-swapping to ensure adaptability to future market structures.
Lessons Learnt
Early stakeholder engagement is critical
As the project aims to develop a model that can be widely used and benefit as many NESO colleagues as possible, it has involved significant internal collaboration. Early engagement with colleagues across NESO helped shape and strengthen the proposal, as well as establish a clear and effective engagement plan to ensure steady project progress without unexpected delays.
Balance between model complexity and usability
The model is inherently complex, aiming to represent intricate processes in an accessible way for diverse users. This underscores the importance of early design planning and proactive stakeholder engagement to ensure the final outcome meets expectations.
Value of Workshop
During the development of the project, the working group encountered a number of technical challenges. To address these, the project lead organised topic-specific, full-day workshops to explore potential solutions in detail. These workshops proved to be highly productive, enabling the team to identify effective approaches to tackle the challenges.
