Our response to the publication of the REMA consultation summary

On 7th March the government published the summary of responses received from its Review of Electricity Market Arrangements (REMA) consultation. The responses received showed the industry has expressed strong support (92% agreement) for energy market reform that prioritises decarbonisation, security of supply, and cost-effectiveness.

Respondents also agreed that the current market arrangements are not fit for purpose (80% agreement), most who disagreed felt that REMA’s objectives could be met with incremental changes to existing market arrangements.

A second consultation will be published in 2023 with decisions on shorter-term reforms to be taken forward where it is feasible to do so.

While the publication of the long-awaited consultation summary may still leave many questions unanswered, it is a significant step forward in laying out the core objectives for the energy industry. Not least the aims to secure up our energy supply, focus on decarbonisation and ensure the cost-effectiveness of the system, objectives that can complement each other in their implementation.

This first step in the REMA process has demonstrated what many in the energy industry have been saying all along, energy market reform cannot be met with small changes, there must be structural transformation to existing market arrangements. 

If we look deeper into the response, the way forward becomes a little less clear, with varying views across the industry. The verdict on nodal and zonal wholesale pricing was inconclusive, and there will need to be further consultation to determine whether to focus solely on zonal or consider both options. The topic of locational pricing remained a cause for concern among many respondents, and the government will need to review if the drawbacks to market investment constitute a warning sign.

As we consider the path forward towards achieving our energy goals, it’s not enough to simply state the objectives or list the concerns; we must also provide viable solutions. There are many thoughts to explore, from using Power Purchase Agreements (PPAs) to deploy mass low-carbon power, to the government continuing to assess the feasibility of green power pools. However, the implementation details require further consideration.

There is also flexibility markets to consider, with the government opting not to pursue a supplier obligation. The discussion surrounding flexibility market reform will now include looking at the role of suppliers in supporting demand-side flexibility, along with any additional requirements that may be necessary. – By no means a small task.

We look forward to the publication of the second consultation and remain hopeful we will see more progress towards a green, secure and sustainable future for both the energy industry and its consumers.

Related thinking

E-mobility and low carbon

Is Europe’s EV uptake stalling? EV Country Attractiveness Index findings

In the first quarter of 2024, battery electric vehicle (BEV) sales and public charge-point installations have continued to grow across Europe. The new financial year has also seen many countries implement new subsidies to spur further growth. Amid this, conversations continue around the influence of cheap Chinese imports across European...

Home supply and services

Reforming Energy Bills: What’s on the Table?

There has been much speculation in the energy industry over what reforms to household energy bills could potentially be introduced, particularly with Ofgem due to announce its Q3 (July – September) 2024 Default Tariff Cap figures on Friday (24th). With so many areas under review, we’ve put together an overview...

Regulation and policy

How effective were the UK’s energy bill support schemes? 

Introduced during a period of record high energy prices, the UK Government's energy support schemes came to an end on 31 March this year. Evaluating emergency measures such as these purely on their value for money is difficult, as the policy was intended to serve multiple purposes.   At the time...

Regulation and policy

Government Announces Record Budget for Contracts for Difference Allocation Round 6

The government has released the budget and reference prices, along with the auction parameters, for the upcoming Contract for Difference (CfD) Allocation Round 6 (AR6). As recently reported, there were considerable questions outstanding about the parameters which will be used in the auction and significant pressure was placed on AR6...

Regulation and policy

Two years on: How Russia’s invasion of Ukraine reshaped the UK’s energy landscape

Two years ago, on 24 February 2022, Russia launched a large-scale invasion of Ukraine. As well as causing widespread devastation and displacement, resulting in a humanitarian crisis, the ensuing conflict also had a wide range of consequences for the energy sector such as causing a structural change in European gas...

Commercial and market outlook

What to look out for in 2024

Cornwall Insight experts provide their predictions for the year ahead in this handy infographic. We have collated some predictions from across our knowledge base to provide a quick snapshot of what to look out for in the GB energy market in 2024. The key highlights include the global discussion on...

E-mobility and low carbon

Paving the way: EV Country Attractiveness Index findings

Following the previous iteration of the EVCA Index, published in September 2023, the EV market has continued to grow across Europe. From October 2022 to October 2023, the EU, Norway, and the UK have seen a combined 29% year-on-year increase in battery electric vehicle (BEV) sales. Cornwall Insight have partnered...

E-mobility and low carbon

Driving growth: EV Country Attractiveness Index findings

Since the previous iteration of the EVCA Index, published in June 2023, there have been some changes to the electric vehicle (EV) landscape. The EV market has continued to grow with battery electric vehicle (BEVs) sales increasing across Europe. Cornwall Insight have partnered with law firm Shoosmiths to create the...