UK ENERGY LAW AND ELECTRICITY SYSTEM: SYSTEMIC RISK CONCENTRATION AND DEPENDENCY MAPPING

1. Concept and Regulatory Importance

Systemic risk concentration arises where the reliability of the electricity system becomes excessively dependent on a limited number of assets, substations, transmission corridors, digital systems, suppliers, generators or interconnectors. Dependency mapping identifies those relationships and determines how failure in one component could propagate through electricity networks and into other Critical National Infrastructure (CNI), including transport, communications, water, healthcare and financial services.

The issue has become increasingly important as electrification, digitalisation, renewable generation and interconnected infrastructure create more complex dependencies. Following the North Hyde substation incident, the UK Government expressly recognised that disruption at an energy asset can produce cascading effects across multiple CNI sectors and called for improved mapping of cross-sector dependencies. GOV.UK

2. Electricity Act 1989 and Security-of-Supply Duties

The Electricity Act 1989 provides the central statutory framework for electricity generation, transmission, distribution and supply. Ofgem/GEMA regulates electricity licensees and must exercise its statutory functions while taking account of consumer interests and security of supply.

Under the modern institutional structure, the National Energy System Operator (NESO) has responsibilities for operating and strategically planning the system. The Energy Act 2023 strengthened the whole-system planning framework, while Ofgem remains responsible for regulatory supervision. Government documentation confirms that Ofgem’s statutory responsibilities extend to protecting consumers’ interests in relation to security of electricity supply. GOV.UK

Systemic-risk regulation therefore requires regulators to consider not merely whether individual assets comply with technical rules, but whether combinations of failures could threaten the wider electricity system.

3. Dependency Mapping and Critical Infrastructure

Dependency mapping identifies single points of failure, common-mode risks, shared substations, concentrated transmission routes, telecommunications dependencies, fuel dependencies, cyber dependencies and cross-sector infrastructure relationships.

The Government’s response to NESO’s North Hyde review calls for asset- and site-level risk assessment, explicit consideration of resilience where critical sites have multiple electricity supply points, and improved understanding between CNI operators and electricity networks. DESNZ and NESO have also been tasked with improving mapping between energy infrastructure and other CNI sectors. GOV.UK

The objective is to move from isolated asset regulation toward whole-system resilience governance.

4. Strategic Network Planning and Risk Diversification

Systemic concentration can also arise where large quantities of generation or demand depend upon the same transmission corridor. Strategic planning can reduce this risk through reinforcement, alternative routes, storage, demand flexibility and geographically diversified resources.

The 2025 National Policy Statement EN-5 recognises that security and reliability depend upon adequate electricity-network infrastructure and identifies nationally significant network reinforcement as a critical national priority. GOV.UK

Ofgem has also conditionally approved NESO’s Centralised Strategic Network Plan methodology, providing a framework for identifying long-term system needs and developing coordinated transmission solutions. Ofgem

5. CASE LAW

Case 1: RWE Generation UK Plc v Gas and Electricity Markets Authority [2015] EWHC 2164 (Admin)

Facts: RWE challenged Ofgem’s approval of changes to the Transmission Network Use of System charging methodology. The charges recovered expenditure associated with maintaining and developing electricity transmission infrastructure. Bailii

Legal Issue: Whether Ofgem’s modification of transmission charging arrangements was irrational, discriminatory or legally defective.

Judgment: The High Court dismissed the challenge and held that Ofgem’s decision was lawful.

Legal Principle/Ratio: Ofgem may adopt methodologies reflecting the different impacts that generators have upon transmission-system investment and constraints, provided statutory and public-law requirements are satisfied. Bailii

Significance: The case demonstrates how network costs and constraints can legally be allocated according to their systemic effects.

Case 2: Peak Gen Top Co Ltd v GEMA [2018] EWHC 1583 (Admin)

Facts: Small embedded generators challenged Ofgem’s decision altering transmission charging benefits available to them. Bailii

Legal Issue: Whether Ofgem’s approach unlawfully discriminated against embedded generators or failed to consider relevant matters.

Judgment: The court examined the legality of Ofgem’s restructuring of charging arrangements within the interconnected transmission and distribution system.

Legal Principle/Ratio: Regulatory decisions may consider the wider effects that particular market participants impose on the integrated electricity network.

Significance: The case illustrates that dependency analysis must consider transmission and distribution networks as interconnected systems rather than isolated assets.

Case 3: SSE Generation Ltd v Competition and Markets Authority [2022] EWCA Civ 1472

Facts: The dispute concerned transmission charges and the treatment of congestion-management costs within Great Britain’s transmission system. Bailii

Legal Issue: Whether GEMA could adopt an interim charging methodology inconsistent with applicable legal requirements.

Judgment: The Court of Appeal examined the limits of regulatory discretion in establishing transmission charging rules.

Legal Principle/Ratio: Electricity-system complexity does not permit regulators to depart from governing statutory and regulatory requirements.

Significance: The decision shows that managing systemic congestion and concentration risk must remain legally accountable.

Conclusion

Systemic risk concentration and dependency mapping are increasingly central to UK electricity law. The developing framework combines Electricity Act regulation, NESO whole-system planning, Ofgem oversight, CNI resilience, strategic transmission planning and cross-sector dependency analysis. Its purpose is to identify concentrated vulnerabilities before failures cascade across the electricity system and other essential infrastructure. GOV.UK