Performance Improvement in the Private Sector
The Electricity System Operator (ESO) is the electricity system operator for Great Britain, tasked with ensuring that power supply and demand are always in balance. Following the Covid-19 pandemic and the Russian invasion of Ukraine, the cost of balancing the electricity network in Great Britain tripled from an annual £1 billion to £3 billion, contributing to what amounted to a national crisis over power supply and costs.
ESO realised that behind the rise in balancing costs it faced an organisational challenge that demanded transformation in ways of working. That is why ESO engaged Capgemini as a strategic partner with the digital-transformation skills capable of designing a multi-phase project that would bring down balancing costs, protect consumers and meet the expectations of the regulator Ofgem, while changing the operating mindset of ESO.
The first phase involved the creation of an end-to-end diagnostic of the client’s balancing costs process to enable the client to understand its own internal processes better and demonstrate to stakeholders that it was working to reduce balancing costs to the lowest level possible.
In the second phase, Capgemini designed and launched a Balancing Costs Portfolio of initiatives across ESO, delivering a programme to engage with internal and external stakeholders to communicate the Portfolio initiatives and demonstrate their impact. In the third phase Capgemini was tasked with developing a long-term balancing costs strategy to meet the concerns of Ofgem.
In phases one and two, Capgemini brought a high degree of clarity to a previously unmapped balancing costs value chain, providing the client with a clear picture of the current state of the balancing costs operation and identifying levers for change right across the balancing costs process.
In phase three, Capgemini developed and tested the ESO Strategy for Balancing Costs, showing a likely saving of over £12 billion over three financial years. ESO published this strategy as part of its end of scheme report, supporting its efforts to better communicate with industry on how it is reducing balancing costs. This strategy will be a critical tool for ESO to coordinate collaboration with industry and the regulator to reduce future balancing costs and operate the power system in a way that delivers better customer value.
This was a complex engagement where outcomes were measured in different ways – increased understanding of the ESO balancing costs process and value chain, identification of a large number of specific performance improvement initiatives, the establishment of trust in the validity and accuracy of new forecast and management models, and a well-founded expectation of tangible balancing cost reductions.
Beyond the cost-saving numbers, the Capgemini engagement brought about a change in operating culture that has been felt across ESO. Capgemini brought a ‘fail-fast/progress-fast’ mindset and an appetite for managed risk into the organisation, which has transformed ways of working and has accelerated the implementation of initiatives to drive down cost and increase efficiency.
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