News

Today, the Government has announced its final decision of the Review of the Electricity Market Arrangements (REMA) programme.

Following an extensive consultation which started in 2022, the Government has concluded that reforming the system while retaining a single national wholesale price is the right way to deliver a fair, affordable, secure, and efficient electricity system. 

UKERC Researcher Callum MacIver, said:

“Today the Government has made a long awaited and highly contested decision on zonal pricing, choosing to progress towards a reformed national market over a switch to zonal pricing.

 UKERC does not have a position on the decision, since opinions may differ across our consortium. We also do not have a vested interest in the outcome. Nevertheless, we welcome the fact that a decision has been made. This provides much needed clarity ahead of upcoming renewables auctions and signals a renewed focus on the huge delivery challenge of the next 5 years and beyond to meet our Clean Power 2030 and wider decarbonisation targets.

Meeting Clean Power 2030 targets requires a step-change in the pace of investment in and delivery of clean energy generation projects, flexibility assets, and new transmission network infrastructure. Government has decided to retain a relatively stable power market environment, taking an incremental approach to market reforms, rather than embarking on a multi-year transition to an entirely new and not yet fully defined market structure at the same time as attempting to meet these challenging near-term ambitions.

Zonal pricing offers potential operational benefits in the 2030s, primarily relating to the efficient dispatch of two-way flexible assets like storage and interconnectors. However, UKERC analysis highlighted additional risk to investors in clean generation, particularly at a time when there is uncertainty over transmission build, and hence zonal price formation. The interaction of these two competing forces creates uncertainty over the scale of the benefits case and the ability to meet ambitious clean power targets.

It is now incumbent on the sector to pull together to refine and deliver the near term reforms to existing market frameworks. Detailed work needs to evaluate the options – such as balancing mechanism reform, ancillary service markets, transmission charging, and the connections regime. The goal is to reduce existing inefficiencies in the market while retaining confidence in the ability to deliver a clean energy system at lowest cost to the consumer.”

Key parts of the reformed national market package include a Strategic Spatial Energy Plan, driving forward work on transmission charges, and improving the efficiency of the system.

Read UKERC’s analysis on zonal pricing volume risk and locational signals in a reformed national market.

Read the full Government press release.