Two thirds of energy industry professionals think the market needs to be drastically reformed

A survey conducted of over one hundred leading energy market professionals from across the investment and advisory community, by Cornwall Insight, from the attendees of its Financing Net Zero forum, has shown nearly two thirds (63%) of people working in the energy industry1 believe the UK market needs to be drastically reformed, with 96% of the professionals including investors, advisors and developers saying improvements need to be made.  

Rising consumer energy prices, and the prospect of energy import disruptions have pushed market reform into the spotlight. A Review of the Electricity Market Arrangements (REMA) was announced in the government’s Energy Security Strategy, published in April, with several options being considered. However, there is no clear consensus over the best method of reform, with caution advised before any hasty measures are implemented.  

One of the core debates is the potential move away from the GB-wide wholesale electricity prices to costing wholesale prices on a local basis, known as nodal or Locational Marginal Pricing (LMP). While some say this will encourage energy generation to locate to lower cost and more efficient areas, level out the volatile consumer prices and help ensure smooth dispatch, over 60% of those surveyed disagreed that this was the best option to proceed with. There have already been several studies and position papers from across different stakeholders in the energy industry on this reform option, some of which are supportive and some of which are not. However, almost all contributions on this model have rightly focused on concerns that that such reforms, being reasonably radical, may halt investment in the short-term and damage sunk investments if not handled with care. Some have gone further and argue that LMP could disrupt the energy market as it transitions, and even potentially disincentivise developers to build in places which are ideally suited to their given technology. Our survey reveals that more traction is being gained from those who argue that LMP is not the appropriate reform option, despite this being favoured by the Energy System Operator and recently featured as a possible reform option in an Ofgem positioning paper.

Source: Cornwall Insight

With record high consumer energy prices exacerbated by the current generator planning and dispatch systems, there is no question that market reform is an area worthy of much more exploration, and so REMA is a welcome endeavour, with reform as a general concept being supported by most. But the question remains, how should it be reformed?

LMP is one amongst a handful of lead options emerging. Although LMP theoretically could help to locate new generation more efficiently, lead to optimal dispatch and more efficient transmission network investment, there are evidently plenty of concerns that this may not be how it plays out in practice, and with every far-reaching reform there is a real risk of investment hiatus and disruption, or even negative impacts on sunk investments. It is clear that if LMP is an option that is pursued there will need to be more work done to carry the industry and investors along for the ride, and in particular to convince people that returns will not be adversely impacted on existing projects.

More specifically, there are questions on whether new generation such as nuclear, offshore wind and carbon capture, utilisation and storage (CCUS) could be economically developed in the most suitable places after the implementation of LMP, noting that location on the electricity system is not the only or often the primary driver for where to locate. Other less flexible constraints around planning, space and broader infrastructure and consumer or supply integration exist for several key low carbon technologies. What is more, LMP would overlay non-locational policy support such as Contracts for Difference (CfDs), designed to help GB reach its net zero goals, leading to the need for reasonably involved changes to existing arrangements.

While the need for reform is certain, and the case for change is widely accepted, it is clear that people do not want rushed change that doesn’t properly account for practical and pragmatic pre-existing factors, or that doesn’t correctly weight, and thus attempt to mitigate for, possible negative impacts on investments. REMA was always going to have to walk that tight rope, whichever reform options are taken forward.


  1. Based on a survey of 114 professionals working in the energy industry

Related thinking

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...

Low carbon generation

Transforming the Energy Market: how change will work for consumers

The past two years have seen rocketing energy prices, as households and businesses grapple with bills far beyond pre-crisis levels. There is no way to turn back the clock, however, we can look to seize the many opportunities to reshape and future-proof the UK energy system, ensuring a brighter future...

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...

Regulation and policy

What’s going on with REGOs?

Renewable Energy Guarantees of Origin, more commonly referred to as REGOs, are certificates issued to accredited renewable generators for every MWh of electricity they produce over a year period. The initial intentions of these certificates were to provide suppliers a means to prove the level of renewable generation they received...

Home supply and services

Ofgem strives to improve consumer experiences across both the domestic and non-domestic sectors

Over the last week, a number of anticipated publications were issued by Ofgem that hold the potential to make a significant change to the requirements on both domestic and non-domestic suppliers. The findings of Ofgem’s non-domestic market review were revealed, alongside a policy consultation on the options available to address...


2022/23 Australian energy insights report

Analytics on key current developments in the Australian energy industry Cornwall Insight Australia has released its latest compilation of Australian energy insights, charts, and analyses. The report includes the topics of energy storage and flexibility, generation (all technologies), power prices, low carbon generation, FCAS, policy and regulation, electric vehicles, and...

E-mobility and low carbon

Charging forward: EV Country Attractiveness Index Findings

Since the previous iteration of the EVCA Index, published in March 2023, there have been some changes to the EV landscape. New countries have emerged as leaders in battery electric vehicle (BEV) growth while others have continued to develop their charging networks and maintain economic strength at a time when...

Home supply and services

Generation guaranteed: suppliers increase Smart Export Guarantee rates  

The Smart Export Guarantee (SEG), as the successor to the Feed-in Tariff (FiT) scheme, offers payments to small-scale low-carbon generators for the electricity they export, with export rates and tariffs being set by SEG licensees. Since the new year we have seen notable increases and changes in the export rates...