Gareth Miller, Chief Executive at Cornwall Insight said:
“Confirming the Review 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 from the Department for Business, Energy and Industrial Strategy is clear. Indeed, there is as much emphasis on security of supply, as delivering an enduring arrangement for a net zero electricity system by 2035.
“The timescales are very ambitious with the expectation of having a road map in place ahead of the next general election. The scope goes beyond how market prices are calculated, also bringing in areas such as the Capacity Market, Contracts for Differences, and balancing services, as well as 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.
“REMA promises the biggest changes in the power market for a generation. It includes options for changing the locational structure, the means of dispatch, and the price setting basis of the wholesale market. Alongside, related changes to existing support schemes, flexibility incentives and operational delivery.
“The potential span of change and the breadth of possible consequences emphasises the need for businesses and investors to carefully weigh decisions and plans. As the market momentum generates its own requirements for clarity, and “pause buttons” are difficult to press, then we imagine many will be trying to build credible scenarios for packages of change, attempting to pick out the most likely combinations in the period before policymakers narrow the field. Such significant changes raise the scope for winners and losers and developing an understanding of what this all means for assets and portfolios will be vital.”
Please see below data from Cornwall Insight’s latest survey on market reform and Locational Marginal Pricing: The survey was of professionals in the energy industry and took place at our Future Energy Trends webinar.