December 2024
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This conference examined next steps for electricity market reform (EMR) in the UK.
It brought together stakeholders and policymakers to discuss potential changes to electricity market arrangements, including the introduction of a new system of charging for electricity transmission networks, and the development of a new flexibility market asset registration process.
The conference followed the recent Government announcement that it will take control of the National Energy Systems Operator (NESO) to run alongside Great British Energy (GBE) with the aim of removing barriers between the planning of electricity and gas networks, and accelerating decarbonisation. Those attending looked at the potential impact of Government’s recent decision on the network overall, as well as implications for reform of electricity markets in light of the new 2030 target for decarbonising the UK Grid, recently brought forward from 2035.
We also expected a focus on the balance of benefits and costs of a central dispatch system compared to the NESO’s balancing mechanism, as well as the possible shift away from a single, national electricity price to a system of locational pricing.
Priorities for innovations in demand response technology were discussed, as well as the way forward for tackling high prices in times of intermittent renewable generation, and potential regulatory reform to support the development of long duration battery storage systems.
We expected delegates to assess Energy Systems Catapult’s recent report Transitional arrangements for electricity market reform, underlining the importance of adopting zonal pricing, reducing reliance on gas, and cutting consumer bills. The report proposes a package of investment protections to support the transition, including amending Contracts for Difference, mitigating volume risk and exploring locational price risk protections, offering tools to mitigate the risks associated with zonal pricing. Delegates considered the feasibility of implementing zonal pricing, looking at implications for rural communities and methods for protecting certain customers from high price increases.
Following the Government’s launch of GBE and the announcement of the Planning and Infrastructure Bill, it was also a timely opportunity to discuss the way forward for policy and implementation with regard to renewable energy projects, as well as development of the publicly-owned GBE and priorities for the newly established Mission Control for Clean Power at DESNZ. It also took place with NESO commissioned to develop a forthcoming Strategic plan for long-term energy infrastructure, expected in 2026.
In assessing the way forward, we expected delegates to draw on themes in DESNZ’s second consultation - conducted under the previous government in March 2024 as part of the ongoing Review of Electricity Market Arrangements - with a focus on approved proposals to support Capacity Market auction liquidity.
Sessions in the agenda also included discussion on the evolution of the Contracts for Difference scheme as the primary means of scaling up low carbon power, reforms to the Capacity Market and CfD schemes, options to address the uncertainty surrounding long-term Transmission Network Use of System charges, EMR’s role in progress towards UK net zero objectives, and priorities for increasing system flexibility and incentivising new asset generation.
We are pleased to have been able to include keynote sessions with: Dr John Bower, Commercial and Corporate Finance Adviser, Review of Electricity Market Arrangements, DESNZ; Andrew Deeley, Director, Strategy and Development, Low Carbon Contracts Company; Malcolm Keay, Senior Research Fellow, Oxford Institute for Energy Studies; Tom Luff, Practice Manager, Electricity Markets, Policy and Regulation, Energy Systems Catapult; and Lisa Waters, Director, Waters Wye Associates.
All delegates were able to contribute, alongside key policy officials, to the output of the conference, which will be shared with parliamentary, ministerial, departmental and regulatory offices. This includes the full proceedings and additional articles submitted by delegates. As well as key stakeholders, those that attended include parliamentary pass holders from the House of Commons and officials from Defra; CMA; CCC; CCS; DBT; DESNZ; DSIT; Ofwat; DAERA, NI; UKIB; DfC, NI; NAO; OBR; Planning Inspectorate; GLD; MoD; GBN; HSE; DfE; DfE, NI; DECC, ROI; DETE, ROI; The Scottish Government; and the Welsh Government.
