2026-077 Dedicated Network Service Licence Options

Tender description

Ofgem is undertaking further policy development following its April 2025 consultation on the review of regulatory arrangements for Dedicated Provision of Network Services (DPNS). The consultation considered a range of regulatory options and recommended the creation of a new licensable activity for dedicated provision of services. Consultation responses broadly supported the proposed direction of travel and aligned with the principles set out in that consultation of ensuring that future arrangements provide appropriate regulatory oversight, support a level playing field, enable innovation and investment, and establish clear roles and responsibilities. Ofgem requires the services of a supplier to analyse the current and future market environment, relevant system operability requirements and the potential impacts of different Dedicated Network Service licence implementation options. This analysis will determine whether a de minimis threshold (for example, similar to how generation licences have a sub-50MW class exemption) or another proportionality mechanism is necessary and appropriate, and how any such mechanism could be designed. The supplier will assess a proportionate range of options, including a zero threshold where appropriate. In doing so, the supplier shall indicate how Ofgem could best set any such threshold, given that three different services are currently in-scope of the one licence (see below for list of services). This means providing a clear proposal on setting of de minimis values for each service, and for calculating this where a provider provides multiple services. The assessment will cover dedicated provision of (any combination of): * reactive power (absorption and injection); * Inertia (natural and synthetic); and * short-circuit level. The work must consider the distinct technical characteristics of each service, including the appropriate measures of capability or output, the relevance of asset location, the potential for a provider to supply more than one service, and the implications of combining or separating thresholds across the three services. Recommendations should be mindful of the types of providers and the other markets they may be engaged in, and consider the best balance of Ofgem's objectives for this potential licensing regime: proportional regulatory oversight, ensuring a level playing field between providers (whether 'dedicated' providers or otherwise), facilitating growth, and ensuring clarity on roles and responsibilities.