The Government’s latest delivery plan for Reformed National Pricing sets out the next stage of electricity market reform, but more decisions are needed to give the industry clarity, according to experts at LCP Delta. While the plan rules out a change to a deemed Contract for Difference and signals progress on investment and siting levers, balancing reform and constraint management, many commitments are limited to further consultation.
George Martin, Principal at LCP Delta, “It has been four years since the Government announced the Review of Electricity Market Arrangements (REMA), and so far, there have been limited concrete developments at a time when constraint costs and operational pressures on the system remain high. The Government spent a long time considering Locational Marginal Pricing until it was discounted as a proposal. And while the sector will welcome the update on the Government’s thinking on market reform, especially on the investment and siting levers and setting out the measures to help reduce constraint costs, this doesn’t provide any more certainty in how the system will operate in the 2030s.
“Our recent modelling shows that the costs of managing constraints due to network bottlenecks could be reduced by up to 60% in 2030 within the scope of Reformed National Pricing, without a significant upheaval to the electricity market. Many of the potential reforms outlined in the consultation do align with the reforms we looked at, but these reforms need to be implemented decisively and quickly to have an impact before 2030. In our webinar on this topic, more than one in two industry stakeholders said the Government should prioritise faster delivery of network build, with around one in six calling for better use of the existing network. This signals that delivery should be prioritised.”
