Replies to Britain’s biggest ever consultation on energy market reform underline the case for a far-reaching revamp, consultants Cornwall Insight believe.
D-ESNZ yesterday published its long-awaited summary of responses to its Review of Energy Market Arrangements (REMA) opinion-gathering, conducted between July and October last year.
In more than 70 questions, REMA probed structural issues such as the switch to low carbon power, reforming wholesale markets including via localised pricing, capital adequacy in the light of mass collapses of suppliers, and system operability. More than 250 responses came from market participants, including nearly 30 from private individuals.
83% of participants agreed that current market arrangements would not deliver the change necessary to achieve decarbonisation by 2035.
Some respondents also noted the importance of avoiding an investment hiatus by providing a clear pathway to reform, and effectively managing any transition period.
Most respondents agreed with the objective of decarbonisation and highlighted how the transition to low carbon generation could be a major driver of decarbonising the economy more widely. Some noted the importance of effective grid infrastructure in facilitating mass renewable deployment.
Tom Faulkner, Cornwall Insight’s head of assets networks & infrastructure commented: “This first step in the REMA process has demonstrated what many in the energy industry have been saying all along. Energy market reform cannot be met with small changes, there must be structural transformation to existing market arrangements”.
On reform of flexibility markets, the summary says discussion will now include looking at suppliers’ role in supporting demand-side flexibility, along with any additional necessary requirements.– “That’s by no means a small task”, says the Cornwall specialist.
Industry opinions on reforms in wholesale market pricing remain split, including on the options of pricing by zone or by generation nodes, Faulkner notes, meaning more consultation will be needed. Locational pricing of retail tariffs still worries respondents, with no consensus emerging.
The consultation will continue in 2023, with the ministry publishing shorter-term decisions where they are viable.
Read the government summary here.