The UK government has launched the biggest review into the country's electricity market design for decades, which it hopes will radically enhance energy security and cut costs for consumers.
The Review of Electricity Market Arrangements (REMA) will seek views on a range of options to address the challenges of responding to higher global energy costs, the need to further boost energy security, and moving to a cleaner energy system.
This includes introducing incentives for consumers to draw energy from the grid at cheaper rates when demand is low or it’s particularly sunny and windy, saving households money with cheaper rates.
Reforming the capacity market so that it increases the participation of low-carbon flexibility technologies, such as electricity storage, is also being explored, as are options for decoupling global fossil fuel prices from electricity produced by renewables.
Under the current system, gas prices often end up setting the wholesale electricity price, because it is often the last source of supply to meet demand. REMA will explore ways of updating this pricing system to reflect the rise in cheaper renewable electricity.
Business and energy secretary, Kwasi Kwarteng, said: “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.
“That includes ensuring the cost benefits of our increasing supply of cheaper energy trickle down to consumers, but also that our system is fit for the future – especially with electricity demand set to double by 2035.
“In what could be the biggest electricity market shake up in decades, I am confident that this review will significantly enhance Great Britain’s energy security and supply for generations to come.”
This week's consultation launch forms part of the government’s comprehensive review of the electricity market, first announced in the British Energy Security Strategy.
It will seek views on the evolution and expansion of existing schemes, such as the Capacity Market and Contracts for Difference, and the introduction of more fundamental change where needed to guarantee uninterrupted supply during periods of no wind or sun at the lowest cost.
“It’s vital that we have a market which supports investments in new projects and infrastructure and allows consumers to get the full benefits of a low cost, low-carbon system,” commented Barnaby Wharton, director of RenewableUK’s Future Electricity Systems.
“This consultation is an important step forward in that process, and the industry will continue to work closely with government on building the clean energy system which the UK needs to reach net zero as fast as possible.”
The consultation is open until 10 October 2022.
Image credit: Shutterstock / Oleksii Sidorov