Review of Energy Market Arrangements (REMA)Announced in the British Energy Security Strategy.

The UK Government recently published its long-awaited second consultation on the Review of Electricity Market arrangements (REMA). A key announcement within the second consultation is the government’s further consideration of a zonal pricing market in GB.

This would introduce different wholesale electricty prices in different zones across Great Britain

DESNZ commissioned modelling considers that introducing zonal pricing could reduce the cost of running the electricity system in the region of c.£5-15bn over 2030-2050, and that consumer benefits could be in the region of c.£25-60bn over the same period.

As an alternative to zonal pricing, DESNZ is also considering whether network charging reforms could deliver the required locational signals as well as some locational changes to the Capacity Market (CM) and Contracts for Difference schemes. The consultation is open until 7 May 2024.

RenewableUK and SolarEnergyUK issued a joint response to the consultation, in which they stated they remain sceptical about the claimed benefits of a zonal system, adding that this would introduce additional uncertainty into the market and raise the cost of capital for renewable energy.

Energy UK’s deputy Director, Kisha Couchman, also responded to the announcement, saying:

“We welcome the government pressing ahead with ensuring the electricity market is fit for this future and capable of attracting the billions of pounds of investment we need for power generation, storage, and network infrastructure. The challenge is to bring forward changes that will support this aim while also providing the certainty that is essential to bringing forward long-term investment – especially when we have no time to waste and there is increasing international competition for such funding”.

You can find more about the Review of Energy Market Arrangements (REMA): second consultation here.

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