The National Energy System Operator (NESO) has launched its first Whole System Innovation Strategy.
Published alongside its annual innovation summary, the strategy outlines how NESO now operating independently since 2024 will drive progress through targeted innovation in areas like grid flexibility, digitalisation, and whole-system integration.
Graham Paul, Service Delivery Director at TEAM Energy, said
I’m pleased to see this timely and ambitious roadmap for transforming Britain’s energy system. It sends a clear message: no single organisation can tackle the energy transition alone. Collaboration across the sector is essential to unlock the innovation needed for a clean, secure, and affordable future.
Below, we highlight the strategy’s key objectives, priority themes, and flagship projects and explore what they mean for the future of our industry.
NESO’s timeline
Strategy objectives and context
Innovation is viewed as critical to meeting Britain’s energy goals. NESO’s strategy was developed through extensive engagement with industry and experts, identifying the key challenges and uncertainties facing the energy system and how innovation can address them. The main objective is to accelerate the transition to a sustainable energy system delivering Clean Power by 2030 and enabling Net Zero by 2050 by focusing on specific innovation needs. This is NESO’s first strategy since its formation (transitioning from National Grid ESO), and notably the first to take a “whole system” view, spanning electricity, gas, and other energy vectors rather than siloed sectors.
The Clean Power 2030 Action Plan released by government in late 2024 set an ambitious course for a stable, affordable, low-carbon grid by 2030 an unprecedented challenge that demands urgent innovation and collective action across the sector. In response, NESO’s 2025/26 Innovation Strategy pinpoints six priority areas where innovation must be accelerated in the next few years to hit the 2030 target, while also laying groundwork for 2050. It also outlines enabling conditions needed to maximise the impact of these innovations.
Key innovation themes and priority areas
NESO’s Whole System Innovation Strategy identifies six innovation priority themes, these are the critical focus areas deemed essential to deliver a decarbonised, flexible, and secure energy system on the required timeline.
Each theme corresponds to a major challenge or opportunity for the industry. The strategy calls for accelerated innovation in these domains, not just by NESO but through collaborative industry-wide efforts. The six key innovation priorities are:
- Unlock Demand-Side flexibility: Enabling homes and businesses to adjust energy use like smart EV charging or demand response to support grid reliability. This reduces peak strain, defers costly upgrades, cuts costs, and helps consumers lower bills while advancing net zero goals. The CrowdFlex project exemplifies this approach, trialing large-scale domestic demand flexibility as a reliable grid resource.
- Leverage digitalisation and AI: Digital transformation of the energy system is a running theme across the strategy. NESO stresses deploying digital technology, data sharing frameworks, and artificial intelligence to enhance decision-making and operational efficiency. All pathways to 2030 “clean power” require increased digitalisation. Key initiatives here include building a Virtual Energy System (a digital twin of the energy network) and AI-driven tools for grid control. For instance, a Data Sharing Infrastructure (DSI) Pilot is underway to enable scalable real-time data sharing across the sector seen as crucial for unlocking whole-system visibility, improved operability, and smarter balancing of supply and demand. Likewise, the Volta programme is demonstrating how AI and automation can optimise control room operations in real time, boosting efficiency and foresight in managing the grid.
- Safeguard system security and resilience: Ensuring a stable future energy system is key as the grid shifts to renewables and new tech. NESO is tackling challenges like low inertia, stability forecasting, and cyber threats including quantum risks. Initiatives include a quantum security project and new market mechanisms to source zero-carbon stability services, cutting costs while maintaining a secure, fossil-free grid.
- Drive whole systems integration: Adopting a holistic, cross-sector approach to energy is a defining element of NESO’s strategy. It aims to connect electricity, gas, hydrogen, and regional networks for more efficient, coordinated planning. Innovations include FastPress, an AI tool aligning hydrogen and electricity needs, and Powering Wales Renewably, a digital twin enabling joined-up infrastructure decisions. This cross-sector approach supports affordable, reliable progress toward net zero.
- Optimise network capacity: This strategy is vital as clean electricity demand grows. NESO is innovating to boost grid throughput and manage constraints without relying solely on new infrastructure. Projects include advanced power flow control, dynamic operations, and better congestion forecasting to unlock faster connections and lower costs. In 2024/25, efforts ramped up with new initiatives targeting transmission bottlenecks and enhanced coordination.
- Enable customer energy efficiency and decarbonisation: Empowering consumers to reduce energy use and carbon emissions is a key focus of NESO’s strategy. With demand-side action essential to the energy transition, initiatives include smart tariffs, local energy schemes, and electrification of transport and heating. Projects like CrowdFlex help households shift energy use to times of surplus clean power, lowering bills and emissions. NESO is also exploring market reforms that reward low-carbon choices, ensuring the transition is consumer-led, equitable, and effective.
NESO’s six innovation themes are supported by active, often cross-cutting projects like Solar Nowcasting, which uses AI to enhance renewable forecasting and grid stability. In 2024/25, the most activity focused on Zero-Carbon Transition and Digital & Data Transformation, highlighting priorities in decarbonisation and digitalisation. New initiatives in Whole System Integration also began, with growth expected as gas-electric coordination advances.
Innovation enablers
Beyond its core innovation themes, NESO highlights five key enablers to help scale innovation across the energy sector. These include fostering a culture of innovation, sharing knowledge openly, building workforce skills, strengthening cross-sector collaboration, and ensuring supportive policy and regulation. While not project-specific, these people- and process-focused factors are vital to unlocking the full impact of innovation. NESO stresses that sector-wide cooperation is essential to create the right environment for meaningful change.
Flagship innovation initiatives
The Innovation Strategy is supported by an Annual Summary report, highlighting key projects and pilots that demonstrate how NESO and its partners are addressing innovation priorities. Below are flagship initiatives shaping the future energy system.
NESO is actively turning strategy into action through a wide range of impactful projects. The Virtual Energy System pilot supports digitalisation, while CrowdFlex engages consumers in demand-side flexibility. FastPress and Volta advance whole-system integration and AI-driven grid operations, and the quantum security project addresses future resilience risks.
Other standout initiatives include REVEAL, a platform for testing new balancing services; the Stability Market trial, which saved £47.3m by sourcing zero-carbon inertia; and Solar Nowcasting, which boosted solar forecasting accuracy by 20%. Projects like Neural “Black Box” and cross-border market studies further expand the innovation scope.
These efforts aim to scale successful pilots into routine operations, supported by NESO’s Innovation Incubator team, launched in April 2024 to ensure smooth integration into day-to-day grid management.
Collaboration, funding and industry engagement
Collaboration is central to NESO’s innovation strategy, shaped through input from over 100 stakeholders and aligned with wider industry plans. Positioned at the heart of the energy system, NESO acts as a facilitator, working with others to co-develop solutions.
In the past year, NESO partnered with 74 organisations from networks and tech firms to universities and government bodies bringing diverse expertise to its projects. Its open Big Idea process encourages external contributions, with 83 proposals submitted in 2024/25, over half from outside parties. Promising ideas receive support and funding, reinforcing NESO’s commitment to inclusive, sector-wide innovation.
NESO’s innovation projects are primarily funded through Ofgem mechanisms like the Network Innovation Allowance (NIA) and Strategic Innovation Fund (SIF). In 2024/25, NESO invested £24 million more than double the previous year across 76 live projects. This included 61 NIA projects (£15m) and 15 SIF projects (£9m), with funding focused on priorities like zero-carbon operability and digital transformation.
To accelerate impact, NESO has improved internal processes to speed up deployment, aiming to reduce the time from pilot to rollout. Transparency and agility are key, with case studies and outcomes shared widely to encourage broader adoption.
Importantly, NESO’s role is to catalyse innovation across the sector. It invites collaboration from utilities, startups, and academia, offering formal programs and an open Big Idea submission process. Projects aligned with NESO’s six priority themes especially those contributing to clean power by 2030 are actively sought, offering partners funding, influence, and access to emerging markets.
Alignment with policy and future outlook
NESO’s Whole System Innovation Strategy directly supports the UK’s Clean Power by 2030 agenda, translating national policy into practical action. Its six priority themes target key challenges like grid stability, demand-side flexibility, and digital integration to accelerate renewable connections and build a zero-carbon grid.
The strategy also looks beyond 2030, laying foundations for net zero by 2050. By investing in whole-system integration, AI, and emerging technologies like hydrogen, NESO is futureproofing the energy system for long-term decarbonisation. It’s a balanced approach: tackling urgent goals while preparing for what’s next.
Challenges and risks
NESO’s strategy acknowledges the unprecedented scale and complexity of the energy transition and the risks that come with it. Technical uncertainties, regulatory barriers, market inertia, and the need for cultural change are all challenges the innovation plan aims to tackle. By identifying these issues early, NESO signals where collective action is essential.
A core response is the “whole systems” approach: integrating electricity, gas, demand, and supply planning, which were traditionally siloed. This cross-sector coordination is vital for net zero. Timing is another key risk 2030 is fast approaching, so innovations must deliver quickly. NESO’s push for greater agility and industry-wide collaboration is designed to accelerate progress.
Ultimately, success hinges on broad industry adoption and strong policy support. For example, aligning market reforms with the Review of Electricity Market Arrangements (REMA) is critical to advancing the future markets priority.
Measuring success
To track and measure progress, NESO uses an innovation scorecard and annual review process. Each year, it assesses project performance across its priority themes, tracking metrics like number of projects, investment levels, and milestones achieved such as prototypes delivered or services launched.
The Annual Summary highlights growth areas, especially in zero-carbon operability and digital innovation, and monitors how projects transition into business-as-usual. It also captures tangible benefits like cost savings and carbon reductions from completed trials.
This feedback loop helps NESO refine its strategy focusing efforts where gaps remain and scaling back where solutions are working. External benchmarks, such as progress toward the 2030 clean power goal and industry uptake of NESO-led innovations, will ultimately show the strategy’s impact. Since the plan is collaborative, widespread adoption by network operators or market players is a shared success for the whole system.
A call to innovate together
NESO’s first Whole System Innovation Strategy offers a bold, collaborative roadmap for transforming Great Britain’s energy system. It makes clear that reaching net zero won’t be achieved through “business as usual” it requires new technologies, new ways of working, and collective action across the sector.
This message resonates strongly with us at TEAM Energy. We believe “no single organisation can tackle the energy transition alone.” The strategy’s emphasis on breaking down silos and fostering cross-sector collaboration aligns with TEAM Energy’s own experience: true innovation happens when the industry works together.
NESO’s openness to partnership is already evident, engaging with 74 different partners and welcoming over 80 new project ideas from third parties in the past year. This kind of teamwork creates a powerful engine for progress. By pooling expertise and resources, the sector can accelerate solutions that deliver a cleaner, more secure energy system for all.
For industry professionals, the strategy highlights key opportunity areas grid digitalisation, AI, flexibility services, whole-system modelling, and clean energy integration all backed by funding and institutional support. NESO invites the sector to engage through initiatives like the Big Idea portal and partnership calls.
With the 2030 clean power target approaching and the groundwork for 2050 net zero goals underway, NESO’s strategy is a timely call to action. We’re committed to playing our part collaborating, sharing insights, and supporting innovation to shape the future of energy.
Collaboration isn’t just beneficial, it’s essential to achieve our common goals.