IN Brief:
- NESO will not admit distributed energy resources or DNO and DSO assets into its reactive-power markets.
- Distribution-originated voltage problems are expected to be managed through distribution-level arrangements.
- NESO will retain long- and mid-term procurement routes but has rejected a proposed day-ahead reactive-power market.
The National Energy System Operator will keep distributed energy resources and assets operated by distribution network or distribution system operators outside its reactive-power markets.
Under the framework, voltage problems arising within distribution networks are expected to be managed by the relevant DNO or DSO rather than passed into a transmission-level procurement mechanism. Distributed generation and storage will therefore not receive a direct route into NESO’s reactive-power markets.
Reactive power controls voltage across alternating-current networks, allowing equipment to inject or absorb reactive output as generation, demand, and system configuration change. Adequate provision supports voltage stability, power transfer, and operation within equipment limits.
Unlike active power, reactive power cannot usually be transported efficiently over long distances. Its value is highly locational because voltage support must be sufficiently close to the part of the network experiencing the requirement, and an asset with ample capability may provide little benefit if it sits behind a constraint or at the wrong voltage level.
NESO considered long-term, mid-term, and short-term procurement routes. Long-term contracts can secure capability several years ahead and support investment in new equipment, while mid-term arrangements provide a route closer to delivery for services above mandatory Grid Code requirements.
A proposed day-ahead reactive-power market will not proceed after NESO concluded that the short-term model would not provide a net consumer benefit. Longer procurement horizons will therefore remain the principal market routes alongside mandatory technical obligations.
Voltage control divides along network boundaries
The framework establishes a clear division between transmission-system requirements and conditions developing within local networks, although that boundary is becoming more complex as solar inverters, wind farms, batteries, EV charging, heat pumps, and industrial electrification alter voltage behaviour at distribution level.
Historically, much reactive-power capability came from large synchronous generators connected to the transmission system. Their excitation systems could vary reactive output, while rotating mass also contributed other stability characteristics.
As conventional generation operates less frequently, networks are making greater use of synchronous condensers, static compensators, reactors, capacitors, and inverter-based resources. Each technology offers a different combination of speed, controllability, fault response, losses, and capital cost.
Distributed batteries and renewable inverters can possess substantial reactive capability, although its availability depends on equipment rating, active-power output, inverter headroom, connection agreements, controls, communications, and the technical standards applying at the point of connection.
Exclusion from a national transmission market does not remove the potential value of those assets. Responsibility instead shifts towards distribution-level procurement or operational arrangements, where the network operator has stronger visibility of the local constraint and the resources capable of resolving it.
Local markets will need to prevent conflicting instructions. A battery may be scheduled for active-power flexibility, wholesale trading, or balancing activity while also being asked to support voltage, and reactive output can reduce the inverter capacity available for simultaneous active-power delivery.
Measurement and verification will differ from active-power services because the operator must establish the voltage condition, reactive response, asset location, and resulting network effect. A metered quantity alone may not demonstrate complete service value where topology, tap positions, and surrounding system conditions change.
European network operators are already considering stronger voltage-control requirements across a more inverter-led system, with connection rules and market procurement increasingly expected to operate together rather than as separate policy areas.
Mandatory obligations must remain distinct from paid services. Generators and storage assets may already be required to provide a defined reactive-power range under grid codes, so additional procurement should address extra capability, availability, or investment beyond those connection conditions.
DNOs may now develop more explicit voltage products as they assume wider system-operation functions. Local procurement could use assets that have little influence on transmission voltage but can improve headroom, reduce reinforcement, or manage conditions within a particular distribution area.
Physical equipment will still be required where market response cannot provide adequate availability or control. Shunt reactors, capacitor banks, transformer tap control, STATCOMs, and network reinforcement offer different engineering solutions, with flexibility procurement sitting alongside rather than replacing those options.
Coordination between NESO and distribution operators will become increasingly important where an asset can affect both network levels. A local voltage instruction should not create an adverse transmission response, while a national dispatch action should not push a distribution area outside its limits.
System models, communications, and operational data will therefore need to improve as more voltage services move towards distribution-level control. Operators must know which assets are available, how they are already scheduled, and what response can be delivered without breaching connection limits.
NESO’s decision clarifies who should address each category of voltage problem, while leaving a substantial implementation programme for distribution operators. As distributed assets gain capacity and technical capability, stable operation will depend on coordinated arrangements across several network levels without allowing one operator’s instruction to create a new constraint for another.
