Background
Following last week’s launch of the Expression of Interest for Competitively Appointed Transmission Owners (CATOs) (CATO Framework: NESO's EoI for Onshore Transmission Projects), the National Energy System Operator (NESO) has now published detailed documentation setting out how it will identify and appraise projects suitable for early competition, and the requirements that bidders will need to satisfy to participate in the tender process (Early competition | National Energy System Operator).
The Project Appraisal Method
The Project Appraisal Method sets out NESO's proposed methodology for determining which onshore electricity transmission projects recommended in the Transitional Centralised Strategic Network Plan 2 Refresh (tCSNP2 Refresh) (Transitional Centralised Strategic Network Plan (tCSNP) | National Energy System Operator) are suitable for delivery via early competition. The methodology has been developed with cognisance of HM Treasury's Green Book and operates through a seven-step process.
The Criteria Regulations
Under the Electricity (Criteria for Relevant Electricity Projects) (Transmission) Regulations 2024 (Criteria Regulations), a project must satisfy four criteria to become a “Qualifying Project” suitable for early competition:
- Network need: the project's electricity solution must be capable, with reasonable certainty, of addressing a network need (all projects recommended by tCSNP2 Refresh will be considered to have satisfied this criterion);
- Novelty: The project's electricity solution must be 'wholly new';
- Separability: The project's electricity solution must be capable of being clearly distinguishable from any other part of the transmission system; and
- Consumer benefit: A Cost Benefit Analysis (CBA) must demonstrate that the non-tendered consumer impact does not outweigh the tendered consumer impact.
The Seven-Step Appraisal Process
Step 1 – Establishing the Longlist: NESO will review the outputs of tCSNP2 Refresh and filter out non-network projects and projects that do not clearly meet the novelty and separability criteria (for example, those solely involving reconductoring of existing overhead lines or installing power flow control technologies).
Step 2 – Longlist Appraisal: Projects on the longlist will be assessed against several factors including an emerging option filter, certainty of meeting the need, CATO Earliest In-Service Date (EISD) compared to the Optimal Delivery Date (ODD) and incumbent Transmission Owner (TO) EISD, environmental and consenting risks/constraints, and technical and construction risks/constraints. Projects appearing in two or fewer Future Energy Scenario (FES) models will be excluded, as will those where the CATO EISD would be later than both the ODD and TO EISD.
Step 3 – Generating the Shortlist: Projects will be excluded from the shortlist if they are emerging options requiring significant further development, appear in only two or fewer FES scenarios, have unfavourable delivery timing, or receive 'Black' ratings for environmental, technical or construction factors.
Step 4 – Shortlist Appraisal: Shortlisted projects will undergo more detailed appraisal, including Cost Benefit Analysis to test the consumer benefit criterion. Factors assessed include CBA performance, certainty of the need, high-level design certainty, and more detailed review of environmental and technical risks.
Step 5 – Favourability Assessment: Each project's favourability for early competition will be determined based on the benefits achievable through early competition delivery, risks associated with successful delivery, and market appetite. Notably, NESO does not propose to assign quantitative scores or formal weighting to assessment factors, instead relying on professional judgement.
Step 6 – Project Prioritisation: Where multiple suitable projects are identified, NESO will prioritise based on the delta between CATO EISD and ODD, market appetite and project value, and environmental and consenting risks.
Step 7 – Recommendation to Ofgem: NESO will submit recommendations to Ofgem including an assessment of how projects meet the Criteria Regulations, an assessment of likely competition, and indicative tender timelines.
Appendix A: Tendered Scope of Works
The draft Tendered Scope of Works template indicates the nature and level of technical information that NESO will provide to bidders for each competition. Key elements include:
Context and Technology Details: Projects will be described with reference to the underlying network need, relevant planning documents (FES, Electricity Ten Year Statement, CSNP), connection drivers, technology type, strategic design, interface zones, and spatial envelope.
Technical Parameters: CATOs must comply with NESO codes including the Connection and Use of System Code, Grid Code, System Operator–Transmission Owner Code (STC) and the Security & Quality of Supply Standard, as well as the Electricity Transmission Design Principles. Solutions must meet a technology readiness level of at least Level 8, meaning an equivalent actual system has been completed and qualified through test and demonstration.
Interface Site Details: Detailed information regarding interfacing substations, fault levels, and system impedance will be shared with bidders post-successful pre-qualification, subject to confidentiality agreements.
Appendix B: Pre-Qualification Questionnaire
The Pre-Qualification Questionnaire (PQQ) establishes the requirements that bidders must satisfy to become “Qualifying Bidders”. Questions are assessed on either a 'for information only' or 'Pass/Fail' basis, with failure on any question potentially resulting in disqualification.
Bidder Information: Bidders must provide details of their structure, ownership, any Ofgem-issued licences, roles within the consortium (Lead Construction Contractor, Qualifying Equity Investors, etc.), and confirm any grounds for mandatory or discretionary exclusion.
Financial Standing: Qualifying Equity Investors must demonstrate Net Assets (for Direct Investors) of at least three times their proposed equity shareholding, or Assets Under Management (for Managed Funds) of at least five times their proposed shareholding, for each of the three most recent financial years. Lead Construction Contractors must evidence annual turnover equal to or greater than 200% of the Qualifying Project value divided by construction duration years, and positive EBITDA in each of the three prior financial years.
Experience of Raising Finance: Qualifying Equity Investors must provide case studies demonstrating experience in raising debt finance and investing and holding equity finance for relevant infrastructure projects.
Technical Capability: Case studies are required evidencing experience in planning and consenting (UK-specific experience required), construction (at least one case study relating to electricity grid infrastructure), sub-contractor and supply chain management, and operations and maintenance.
Appendix C: Invitation to Tender Questionnaire
The ITT Questionnaire sets out the qualitative questions that Qualifying Bidders must answer to demonstrate their proposed approach to developing and delivering their Preferred Solution. Most questions are scored on a 0-4 basis, though Question 2 (Preferred Solution) and Question 11.3 (Debt Term Sheet compliance) are assessed on a Pass/Fail basis, with failure resulting in disqualification.
Options Assessment (Question 1): Bidders must undertake an options assessment considering at least three corridor alternatives and provide a detailed options study report aligned with the Electricity Transmission Design Principles, Holford Rules (Microsoft Word - The Holford Rules.doc) and Horlock Rules (Microsoft Word - horlock_rules.doc).
Preferred Solution (Question 2): Bidders must demonstrate their Preferred Solution meets the technical requirements in the Tendered Scope of Works, including provision of single-line diagrams, network models in DIgSILENT PowerFactory software, and confirmation that all assets meet Technology Readiness Level 8 or higher.
Preliminary Works – Design (Question 3): Bidders must explain their design resourcing strategy and design approach, demonstrating compliance with NESO codes and TO specifications at interface points.
Planning and Consenting (Question 4): A detailed planning and consenting strategy is required, including proposals for community benefits and environmental enhancement.
Land Rights (Question 5): Bidders must provide a detailed land rights strategy explaining engagement with landowners and conflict resolution processes.
Construction (Question 6): A Construction Phase Plan is required, with commissioning processes compliant with STC Procedure 19-4.
Risk Assessment (Question 7): Bidders must provide comprehensive risk assessments covering business continuity, consenting, judicial review, land rights, construction, and supply chain risks.
Programme (Question 8): Detailed programmes for Preliminary Works and construction phases must be provided in both PDF and Microsoft Projects formats.
Operation and Maintenance (Question 9): Bidders must demonstrate their asset management approach, operational availability strategy (minimum 98% target), major failure event planning, and physical and cyber security measures.
Approach to Pricing (Question 10): Bidders must provide clear, evidence-based costing methodology and explain their approach to managing risk of cost changes at the Post-Preliminary Works Cost Assessment stage.
Financing Strategy (Question 11): Comprehensive requirements including financial advisor support, model audit letters, Debt Term Sheet compliance, evidence of funding for Preliminary Works (with funding covering at least 100-140% of estimated costs), equity funding for construction, and a credible debt strategy.
Comment
The publication of these detailed documents so quickly after the Expression of Interest suggests a step change in pace towards bringing the CATO framework to market.
The reliance on professional judgement rather than quantitative scoring in the favourability assessment may provide NESO with flexibility but could reduce transparency for stakeholders seeking to understand how projects are being prioritised. The aim to identify a first project plus three or four additional projects for competition between tCSNP2 and the CSNP in 2028 demonstrates NESO's ambition to build a meaningful pipeline relatively quickly. The requirement for planning and consenting case studies to relate specifically to UK projects (rather than Equivalent Regime jurisdictions acceptable for other case studies) reflects the unique complexities of the UK consenting landscape, particularly for projects requiring Development Consent Orders.
For potential participants, these documents provide valuable insight into what will be required to compete successfully. The level of detail expected—particularly in areas such as options assessment, risk management, and financing strategy—suggests that successful bidders will need to commit significant resources to bid preparation.
Next Steps
Following the publication of tCSNP2 Refresh in Summer 2026, NESO will work to shortlist and prioritise projects for early competition before recommending selected projects to Ofgem. The learnings from the Expression of Interest, for which responses are due by 30 April 2026, will inform the methodology for project identification and the final tender documentation.
