​If 2025 was the year of policy design, 2026 will be the year of implementation. From connections reform to Balancing Mechanism changes, 2026 is when market and regulatory decisions materially affect battery energy storage.

Connections Reform

On Monday 8 December 2025, the National Energy System Operator (NESO) published the high-level results of the connections reform process. This provided the expected capacity by technology type across Phase 1 and Phase 2.

NESO expects to award connection agreements to more than 283 GW of generation and storage capacity by 2035, including over 80 GW of battery energy storage. NESO also plans to award agreements to a further 99 GW of demand projects.

Based on these results, the battery energy storage pipeline is around three times larger than the capacity implied by the Clean Power 2030 targets.

So what happens next?​

• By end of 2025, all applicants will have received initial notifications, including Gate 1 offers for projects that did not meet eligibility or alignment criteria.
  
• Mid-2026, NESO will issue Gate 2 protected and final offers for projects connecting up to 2030, across both transmission and distribution.
  
• Late 2026, all remaining post-2030 offers and notifications will be completed, fully resetting the connections queue.

The Balancing Mechanism

​NESO is planning a series of changes to the Balancing Mechanism to reduce skip rates and improve dispatch methodology using new optimisation tools, code changes, and pricing reforms.

Skip rates

​Optimisation Within a Constraint

• From April 2026, NESO plans to introduce optimisation within a constraint.
• Control room engineers will define constraint limits, while the optimiser evaluates price signals and technical parameters over time to deliver a cost-optimised dispatch outcome.
• This change is intended to reduce manual intervention and help minimise constraint-related skips.

Root cause analysis

• ​Hypothesis testing and data analysis began in 2025. Actionable recommendations scheduled for publication in April 2026.

Target

• ​By February 2026 a final proposal for skip rate reduction target is planned to be confirmed with description and rationale

GC0166

• ​GC0166 parameters must be fully implemented by early Nov 2026 (12 months after code implementation).
• Final switch from 30‑minute rule to MDO/MDB for parties that are ready: June 2026, with a flag so others can temporarily stay on the old rule.

​National Dispatch Optimiser (NDO):

• Goes live January 2026 in parallel run with old optimisers for around three months.
• Future state of energy (FSOE) model in NDO in system test by April 2026, business go‑live June 2026.

P462

• The Assessment phase of P462 is due to conclude in early 2026, with the Assessment Report presented to the BSC Panel in February.
• This will be followed by a Report Phase consultation and submission of the Final Modification Report in April 2026.

We have published a dedicated article exploring the potential impacts of P462 on battery energy storage systems, including how changes to negative pricing in the Balancing Mechanism could affect storage revenues and bidding behaviour.

LDES Cap & Floor Scheme

In September 2025, Ofgem confirmed that 77 projects, totalling 28.7 GW, passed the eligibility stage of Window 1 of the Long Duration Electricity Storage cap and floor scheme. The eligible pipeline was dominated by lithium-ion battery energy storage projects, alongside pumped hydro and flow batteries, and all qualifying projects have now progressed to the Project Assessment phase.

Ofgem and NESO are now running a Multi-Criteria Assessment covering economic value, strategic fit, and financial robustness, with an Initial Decision List due in Spring 2026 and final cap and floor awards expected in Summer 2026.

Frequency response

From January 2026 Dynamic Containment (DC), Dynamic Moderation (DM), and Dynamic Regulation (DR) will be activated directly within the OBP.

​Current areas of focus for improvements to the Dynamic Response Services include investigating options for Locational Procurement and stacking of Response and Reserve.

​NESO intends to launch a formal Article 18 Consultation on the Locational Procurement change in the second half of 2026 which will provide additional opportunities for stakeholders to engage and provide feedback. The change itself is expected to go live early 2027.

Visit the NESO Markets Roadmap page to use their interactive roadmap chart and for more details of each topic.

New markets

The Long-term 2029 tender is a simultaneous procurement process through which NESO is seeking stability and reactive power services to support system restoration from 2029 onwards. It will be delivered through the Stability Market and Reactive Power Market rather than bespoke pathfinder arrangements.

So far, NESO has completed has issued Invitations to Tender to participants that met the requirements.

The Invitation to Tender stage is ongoing, with NESO due to assess technical and commercial submissions before awarding contracts to successful bidders, enabling delivery of restoration and network services from 2029.

Visit the NESO Markets Roadmap page to use their interactive roadmap chart and for more details of each topic.

Central Planning

​NESO has indicated that the next full Future Energy Scenarios publication will not be delivered until 2028, representing a shift away from the annual cycle. In the interim, system planning is being driven by a set of new strategic processes:

Strategic Spatial Energy Plan (SSEP)

• ​SSEP will set a single, spatially and economically optimised pathway to 2050 for electricity and hydrogen infrastructure.
• ​​ Summer 2026: NESO submits SSEP pathway options to the Secretary of State for Energy Security and Net Zero for decision.
• Spring 2026 onward: Public consultation on the draft SSEP Environmental Report starts.

Centralised Strategic Network Plan (CSNP)

• ​The CSNP designs network reinforcements to meet SSEP needs.
• ​NESO will advance the CSNP by publishing system requirements and an indicative offshore network design by Q2 2026.
• It will follow this with an options summary by Q4 2026.
• The full CSNP is due in late 2027.

Regional Energy Strategic Plan (RESP)

• ​Transitional Regional Energy Strategic Plans (tRESPs) are an interim step toward full Regional Energy Strategic Planning, providing bespoke national and regional views of future electricity distribution needs across Great Britain.
• The tRESP outputs are due to be published in Q1 2026.
• ​Final RESP methodology is due to be published in Q2 2026, subject to Ofgem and DESNZ approval.