UK launches 'biggest electricity market reform in a generation'
Mon 01 August 2022
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The Government is currently consulting on proposals described as the 'biggest electricity market reform in a generation'. The Review of Electricity Market Arrangements (REMA) is seeking views on options to address the combined challenges of higher global energy costs, the need to further boost energy security and move the UK to a cleaner energy system.
Proposals include:
- introducing incentives for consumers to draw energy from the grid at cheaper rates when demand is low or it’s particularly sunny and windy, saving households money with cheaper rates
- reforming the capacity market so that it increases the participation of low carbon flexibility technologies, such as electricity storage, that enable a cleaner, lower cost system
- de-coupling costly global fossil fuel prices from electricity produced by cheaper renewables, a step to help ensure consumers are seeing cheaper prices as a result of lower-cost clean energy sources
Under the current system, gas prices often end up setting the wholesale electricity price, because it is often the last source of supply to meet demand. The ever-increasing participation of renewables in the system means over time, cheaper electricity produced by renewables energy will determine the price more often. The consultation is exploriong ways of updating this pricing system to further reflect the rise in cheaper renewable electricity.
Business and Energy Secretary Kwasi Kwarteng said: "We’ve just seen the price of offshore UK wind power fall to an all-time low and gas is a shrinking portion of our electricity generating mix, so we need to explore ways of ensuring the electricity market is adapting to the times.
"That includes ensuring the cost benefits of our increasing supply of cheaper energy trickle down to consumers, but also that our system is fit for the future – especially with electricity demand set to double by 2035."
With rapid increases in electricity demand particularly from transport and for heating, the Government says that electricity demand is set to at least double over the next 13 years. REMA aims to establish a fit-for-purpose market design, identifying and implementing the reforms needed to GB electricity markets that work for businesses, industry, and households.
A National Grid ESO spokesperson said: "We welcome the breadth and depth of BEIS’ Review of Electricity Market Arrangements. Wholesale markets need reforming to meet net zero and deliver better outcomes for consumers across Britain. REMA is the right forum for stakeholders to align on what is needed."
The Zemo Partnership-convened EV Energy Taskforce has focused on the impacts of the growth in electrification of road transport on the energy system and the potential benefits that can be gained through closer and better collaboration between a wide range of stakeholders, including through smart charging and other mechanisms.
The REMA consultation is open until 10 October.
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