Following the commitment set out in its Energy Security Strategy, the government has published a consultation on the Review of Electricity Market Arrangements (REMA). This aims to ensure that the electricity market design is fit for the purpose of maintaining energy security and affordability for consumers as the electricity sector decarbonises.
The consultation sets out a range of options for reform for all (non-retail) electricity markets, including the wholesale market, balancing mechanism and ancillary services, as well as policies that impact these, such as the evolution of and alternatives to the Contracts for Difference (CfD) scheme and the Capacity Market.
This overview focuses on the initial options for reform in order to deliver a net zero wholesale market, capacity adequacy, and flexibility.
Following the consultation, which closes on 10 October 2022, BEIS will seek to determine and develop what reforms are needed through engagement with the energy sector, and then establish a full delivery plan and oversee implementation.
Cornwall Insight comment: Confirming the Reform of Electricity Market Arrangements (REMA) opens the prospect of a complete overhaul of the electricity market in Great Britain for the first time in over 20 years. The scope is very wide and the perceived need for reform clear from BEIS in the consultation document, with much emphasis on security of supply, as well as delivering enduring arrangement for a net zero electricity system by 2035. The timescales are also very ambitious with the expectation of a road map in place ahead of the next general election. The scope goes beyond the way that market prices are calculated, also bringing in areas such as the Capacity Market, Contracts for Differences and balancing services, and how consumers can play a more active role in the transition. If implemented the terms of trade for generators, consumers and investors could change substantially.