Reforming the electricity market is essential to delivering a cost-effective, stable, net zero-ready energy system, according to a new report published today.
The document, Transforming the energy market: how change will work for consumers, which is a joint venture between Cornwall Insight and the MCS Charitable Foundation, urges the government to change the way electricity is transmitted and sold, to encourage investment and reduce the risk of higher energy bills.
The Government is currently contemplating several changes to the electricity market, under their Review of Electricity Market Arrangements (REMA) proposals. These include a shift to Locational Marginal Pricing, whereby some consumers could see lower electricity bills if they live near to where significant amounts of energy is generated. A second option would split the electricity market into two categories – electricity produced from fossil fuel gas and much cheaper renewable electricity. Other proposals include introducing new incentives for encouraging flexibility in electricity generation and storage so that the grid can be more responsive when demand is high.
The report introduces the policy opportunities which could significantly reduce the risk of future energy price shocks by creating a more stable energy market, attracting investment, lowering the cost of capital and stabilising bills.
Kate Mulvany, Principal Consultant at Cornwall Insight said:
“The government has been looking to reform the electricity market for some time, but plans are progressing slowly. It is vital we do not miss this unprecedented opportunity to build an electricity market which embraces renewable generation, encourages investment, and will help stabilise electricity bills for households and businesses alike.
“We cannot turn the clock back to a pre-energy crisis world, but there are a number of options available to build a renewables-based energy system which embraces the changes we have seen. By taking proactive steps to reshape electricity policy, we can build a system that delivers security of supply and value for money for generations to come.”
David Cowdrey, Director of External Affairs at the MCS Foundation, said:
“Our current electricity system was fit for the fossil fuel-powered 20th Century, but not for the renewables-powered 21st. We need rapid action from Government to implement reforms that will help unlock renewable generation capacity, get energy to homes and businesses in an effective way, and bring down bills permanently.
“This report from Cornwall Insight sets out the options available to Government and makes clear the need for urgent action.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, said:
“Reform of electricity pricing is the missing piece of the jigsaw when it comes to creating a clean, secure energy supply for the future.
“While there is no doubt that it is a complicated issue, the goal must be to pass through the cheaper cost of renewables to customers as quickly as possible in order to bring electricity bills down.”