Confirming the Review of Electricity Market Arrangements (REMA) opens the prospect of a complete overhaul of the electricity market in Great Britain for the first time in over 20 years. The scope is very wide and the perceived need for reform clear from BEIS in the consultation document, with much emphasis on security of supply, as well as delivering enduring arrangements for a net zero electricity system by 2035.
The timescales are also very ambitious with the expectation of a road map in place ahead of the next general election. The scope goes beyond the way that market prices are calculated, also bringing in areas such as the Capacity Market, Contracts for Differences and balancing services, and how consumers can play a more active role in the transition. If implemented the terms of trade for generators, consumers and investors could change substantially.
Cornwall Insight chief executive Gareth Miller said: “REMA promises the biggest changes in the power market for a generation. It includes options for changing the locational structure, the means of dispatch, and the price setting basis of the wholesale market, and then also considers related changes to existing support schemes, flexibility incentives and operational delivery.
The potential span of change and the breadth of possible consequences emphasise the need for businesses and investors to carefully weigh decisions and plans. As the market momentum generates its own requirements for clarity, and “pause buttons” are difficult to press, then we imagine many will be trying to build credible scenarios for packages of change, attempting to pick out the most likely combinations in the period before policymakers narrow the field. Such significant changes raise the scope for winners and losers, and developing an understanding of what this all means for assets and portfolios will be vital.”
More reactions from Cornwall Insight on REMA will follow this week for subscribers plus listen to our latest podcast on the topic here.