Constraint costs continue to attract attention because they have a growing influence on bills and on the pace of the UK energy transition.
As Government prepares the next stage of Reformed National Pricing (RNP), Mark Cox, Head of Nuclear and Wholesale at EDF, and Mark Williams, Senior Adviser in EDF's Strategy and Policy team, have taken a fresh look at how these costs are changing and what it means for the system.
Mark Cox heads up EDF's policy team focussed on the development of low carbon generation and electricity market arrangements. Prior to EDF Mark worked at the energy regulator Ofgem where he held a number of senior positions.
Mark Williams is a Senior Adviser in EDF's Strategy and Policy team, where he specialises in electricity market reform to support decarbonisation, including expanding clean flexibility and integrating renewables. Mark joined EDF in 2025, and was previously the Head of Analysis at Energy UK.
In this blog:
- Current UK constraint costs: what 2025-26 data tells us about grid congestion
- How the UK constraint cost trajectory is shifting in 2025-26
- Why NESO's constraint cost forecasts may be outdated - and what's changed
- Why accurate constraint forecasts matter for RNP and the UK's clean power goals
What's happening right now with constraints costs?
Constraint costs are a growing challenge that increase electricity bills and undermine confidence in the rollout of renewables. Last year, we wrote about how important it was to contain these costs, and set out proposals that could make a real difference. Mitigating constraint costs is rightly a core focus of electricity market reforms, which enter a pivotal stage in 2026, as the Government fleshes out details of Reformed National Pricing and accelerates progress towards the clean power mission.
This blog revisits the question of constraints ahead of the Government consulting on its reforms, calling on NESO to provide a more up-to-date set of constraints forecasts so that Government can properly account for likely developments in the next stage of Reformed National Pricing. Recent developments will shape the trajectory of constraint costs and understanding how these costs are likely to evolve is essential to designing a system that best serves consumers.
Constraints arise when the grid cannot move enough electricity from where it is generated to where it is needed, with power plants paid to turn up and down in different parts of the country to manage the bottleneck. The cost of these constraints has risen, reaching £1.7bn in 2024/2025, up from around £0.5bn per year before 2020.1 That was driven by higher gas prices and by more renewable generation coming online in constrained parts of the country, especially Scotland.
But what's going to happen now? Costs may 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 2030.2 Early evidence indicates that constraint costs are not accelerating as quickly as forecast and this raises important questions about which pathway we are on and what the implications are for upcoming strategic developments in the sector.
The trajectory on constraints is changing
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. In fact, the outturn data sits closer to NESO's counterfactual scenario, in which constraint costs do not materially spike. While this is a single year of data (reflecting weather and market conditions), this has implications for system and market design that should be factored into the Government's Reformed National Pricing programme. This does not mean that constraints are no longer a problem - they are and remain a material cost to consumers - but the nature of the challenge over the rest of this decade now appears different.
Why forecasts may no longer reflect reality
Like any modelling exercise, NESO's forecasts of constraint costs are based on a set of assumptions from a single point in time. Our energy system is in a state of flux and this makes predictions about what it will look like in 5-10 years' time especially difficult. Since NESO made its balancing cost forecasts, there have been several major developments that may change the level of constraints we can expect to see:
- Allocation Round 7: this record-breaking Contracts for Difference round will shape renewable developments over the rest of this decade, ultimately determining the future of constraints. The 8GW of offshore wind awarded suggests we are on track for around 36GW of offshore wind in 2030,3 with potentially a little more from the AR8 auction expected later this year. While that is an impressive growth from today, offshore wind capacity in 2030 is likely to sit at the lower end of the 43-50GW range assumed for Clean Power 2030.4 All else being equal, this will lead to lower constraint costs. In addition offshore projects in AR7 are more concentrated on the East Coast, with less in northern Scotland compared to previous rounds. Likewise, onshore capacity is characterised by a bifurcation, with solar dominating in England and wind dominating in Scotland, with distribution-connected projects featuring heavily. Overall, this will alter the nature of constraints in coming years.
- Connections Reform: to help manage an increasingly complex queue of projects seeking connections to the grid, NESO are reviewing the dates when individual projects will be allowed to connect to the network. The results of individual projects have not been published, but it appears that even the majority of near-term protected' projects have had their connection dates delayed according to Ofgem.5 While the aggregate impact of connections reform on constraint costs is hard to see, it is likely to lead to material differences. Particular attention should be paid to projects given priority connections in Scotland (including 13GW of batteries and 10GW of onshore wind)6 because the pathway of constraint costs is likely to be highly sensitive to the relative timing of these developments and the market arrangements they operate under.
- Grid reinforcements: the grid is being transformed with over 80 projects to enhance capacity in order to support renewables and electrification. To some degree, each of these projects will help alleviate constraints, but some projects matter much more than others. Likewise, upgrades to the grid tend to be large, expensive, multi-year endeavours. This makes predicting when individual projects will go live difficult. NESO addressed this uncertainty by modelling scenarios in which certain key pieces of grid investment can be accelerated when doing so would significantly reduce constraints. While it is difficult to track the progress of so many projects, in general there is not strong evidence for significant accelerations. Greater transparency about these transmission developments would give us a clearer indication of how they are likely to impact constraints. EDF has previously called for mandatory minimum half yearly updates on project progress and spend.
- Commodity prices: the majority of constraint costs are the expense of getting gas power plants in unconstrained areas - typically in England and Wales - to fire up to replace renewable electricity that has been turned down. A major part of that cost comes from gas and carbon prices. Commodity prices are volatile over time and extremely difficult to forecast accurately. The past year has seen significant changes in global gas markets, in addition to policy developments on linking the UK and EU carbon price that will shift the cost of constraints over time. Gas and carbon prices for 2025 are tracking below the levels assumed in NESO's projections, with outturns substantially under the forecasts presented in 2024.
Collectively, this implies that the system is evolving differently from what NESO assumed in its forecasts.
Why does this matter?
Whatever happens, as the system develops, we need to optimise investment in generation and the grid alongside reforming market arrangements to deliver secure, clean and affordable power to consumers. It might be the case that slightly higher constraint costs will lead to lower overall costs for consumers if they reflect more efficient investment decisions. As discussed in our previous blog, a major barrier to planning system developments and market reforms is that we have limited visibility on the direction we are heading in when it comes to constraints. NESO's forecasts have been helpful, but we believe that as time goes on and the system develops, they are becoming a less accurate picture of where we are heading. Given how much change is coming in the electricity system, it is vital that we have a clear view both of where constraints are heading and what an efficient system looks like in future. NESO should, therefore, support planning and policy development by providing:
- Updated constraints forecasts: given how much has changed, now is the time for NESO to refresh their constraint costs forecasts, last presented in summer 2025. With the amount of uncertainty about developments in the sector, NESO should take this opportunity to provide more details on a range of outcomes beyond their Net Zero Future Energy Scenarios pathways, including a focus on counterfactuals and near-term forecasts as well as the sensitivities surrounding key development milestones.
- An official view of the optimum level of constraints: there is a 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. There is no single answer that will solve constraint costs, but through the right combination of measures we will be able to bring about a system that delivers the best results for consumers. For example, EDF, along with a number of industry partners, are currently supporting LCP Delta to explore how measures including contracting flexible capacity in advance, improving network availability and expanding the participation of small assets in the Balancing Mechanism can reduce constraint costs. We expect the results to be published in the coming weeks. Reformed National Pricing provides a window of opportunity for Government and industry to explore options like these further and shape the electricity system for the better.
To protect consumers from unacceptable and unnecessary costs, we must make the most of this opportunity. That is only possible if we have a clear vision of how the system is likely to evolve, especially on constraints, and NESO are in the strongest position to provide that clarity.
FAQS
What are constraints costs?
Constraint costs are the costs the energy system pays when the electricity grid can't move power from where it's generated to where it's needed. When there's a bottleneck on the network, the system operator (NESO) has to intervene, and as renewables grow faster than transmission upgrades, those bottlenecks are becoming more expensive.
1 Thermal constraints, 2025 Annual Balancing Costs Report, June 2025 (NESO)
2 Projections, thermal costs 2025 Annual Balancing Costs Report, June 2025 (NESO)
3 LCP Delta
4 Clean Power 2030 Action Plan (DESNZ)
5 Update on delays to connection dates for some TMO4+ Protected Projects (Ofgem)
6 Gate 2, Phase 1 offers Connection Reform, Detailed Results Data (NESO)
