The government has launched the “biggest electricity market reform in a generation” as it seeks to bolster its energy security and cut the cost of power amid soaring prices and rampant inflation.
Launched today, the initial proposals of the Review of Electricity Market Arrangements (REMA) include exploring changes to the wholesale electricity market as a means to prevent volatile gas prices setting the price of cheap renewable power, according to the Department of Business, Energy and Industrial Strategy (BEIS).
On top of this, REMA will also look at what immediate action could be taken to help consumers with their energy bills. The energy price cap is expected to be raised again in October and Energy UK has called the problem “too big for any industry to meet” alone.
Some of the changes considered by the review include introducing incentives for consumers to consumer energy at cheaper rates when demand is low, reforming the capacity market so that it increases the participation of low carbon flexibility technologies and de-coupling global fossil fuel prices from electricity produced by cheaper renewables, which BEIS said would help consumers see the benefits of renewable technologies.
BEIS hopes the UK’s “exposure to volatile global gas markets and energy costs for consumers could be radically reduced in the long term” through the review. It will seek a range of views on pathways to address the current energy crisis in the UK and forms part of the government’s comprehensive review of the electricity market, first announced in the British Energy Security Strategy (BESS).
“We’ve just seen the price of offshore UK wind power fall to an all-time low and gas is a shrinking portion of our electricity generating mix, so we need to explore ways of ensuring the electricity market is adapting to the times,” said energy secretary Kwasi Kwarteng.
“In what could be the biggest electricity market shake up in decades, I am confident that this review will significantly enhance GB’s energy security and supply for generations to come.”
With the UK’s electricity demand set to at least double over the next 13 years, REMA aims to establish a fit-for-purpose market design and implement the reforms needed to UK electricity markets, including consulting on the Capacity Market and Contracts for Difference schemes as well as the “introduction of more fundamental change where needed”.
“Wholesale markets need reforming to meet net zero and deliver better outcomes for consumers across Britain,” said a National Grid ESO spokesperson. “REMA is the right forum for stakeholders to align on what is needed.”