UKERC’s response provides commentary and analysis on many of the wide range of topics encompassed in the consultation. This includes the overall vision and objectives, case for change, the evaluation criteria defined by BEIS, locational pricing and local markets, lessons from other countries, changes to wholesale markets and incentives for low carbon generation, flexibility and capacity.

Our response provides detailed and evidence-based analysis on each of these complex topics, drawing on UKERC research and wider outputs. We highlight some of the complex trade-offs involved and argue for a cautious and gradualist approach that builds on the progress already made in some areas.

Key points include:

Some of the proposals would place new responsibilities on retail energy suppliers, and need to be considered alongside any reforms to their role, although those are the subject of a separate policy process.

A move to nodal pricing would sharpen locational signals and could improve the efficiency of system dispatch and make better use of flexible resources. However, it would have a number of implementation challenges and, without suitable complementary arrangements, it would come at the cost of increased uncertainty for market participants. This risks a detrimental impact to investment in renewables which should be considered in the context of wider policy goals.

Splitting the wholesale market between generators with higher and lower marginal costs (gas vs nuclear, solar and wind) would involve major upheaval for uncertain benefits, while using Contracts for Differences for low-carbon plants (proposed by UKERC in April) can insulate consumers from the impact of higher gas prices with far less disruption.