Market Design Framework (MDF)

Our Market Design Framework (MDF) was developed in 2021 and has been used since to underpin our market reform decisions to ensure they are robust and evidenced in a transparent and consistent way. This framework has also enabled us to assess the effectiveness of our existing markets, drive continuous improvement and develop new reform opportunities.

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MDF framework

In NESO, the MDF is embedded into our ways of working. This includes completing an assessment based on the updated MDF framework when starting or reviewing any market designs, documenting the assessment based on MDF, and using the outcomes as the evidence to support decision making at governance forums.  The framework has already shaped several areas of work, including the development of the Reactive Power Markets and the Constraints Collaboration Project. 

Reviewing MDF

In 2025 we undertook a review of the MDF to ensure it remains fit for purpose and effectively supports NESO’s new statutory duties and strategic objectives. In using the updated MDF, NESO will undertake an independent review of its markets in 2026 to assess whether market designs and reforms remain robust, consistent, and aligned with the Market Design Objectives and Principles. A previous independent review was undertaken in 2023.

The 2025 review key changes include:

  • One of the Market Design Objectives, "Value for Money", is updated to "System and Consumer Value" to encompass broader considerations such as adaptability, practicality, and net consumer benefits. This change moves from the sole focus of financial cost-effectiveness to broader benefits by making it more implicit that our design objectives should ensure all our services will provide best possible value for consumers.
  • The definitions of Coherency and Transparency in the Market Design Principles have been expanded to ensure they fully address the evolving needs of the energy sector and align with NESO strategic goals. 
    • The Coherency and Coordination principle emphasises that our market design and procurement approaches should align with NESO objectives, government policy and other markets, such as DNO markets and the wholesale market. It also emphasises coordination across different energy vectors to reflect whole system thinking. This should enable efficient use of resources and unlocking greater value through stacking revenues. This principle also includes net zero enablement by ensuring that market design choices facilitate participation from low‑carbon technologies and support decarbonisation and the delivery of net zero.
    • The Transparency principle ensures information is transparent and readily accessible to participants, enabling real-time and post-event auditability. This should facilitate clearer and more predictable procurement decisions, thus reducing uncertainty surrounding NESO’s decision making processes.