Electricity market reform could be a make-or-break moment for net zero

A major review into Britain’s electricity market design represents a “once-in-a-generation opportunity” to build a system that is more than fit for purpose, but “truly” works for users and the planet, according to the Association for Decentralised Energy (ADE).

The government’s Review of Electricity Market Arrangements (REMA) will seek views on a wide range of options to address the combined challenges of responding to higher global energy costs, the need to boost energy security, and move the UK to a cleaner energy system.

Some of the changes being consulted on include:

• 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, that enable a cleaner, lower cost system
• de-coupling costly global fossil fuel prices from electricity produced by cheaper renewables, a step to help ensure consumers are seeing cheaper prices as a result of lower-cost clean energy sources

Caroline Bragg, director of policy and research at the Association for Decentralised Energy (ADE), said: “A net zero electricity system is one where flexibility enables and empowers the massive amount of renewable generation capacity coming onto the system. Flexing demand will give people a better, cheaper electricity service and avoid the need to massively over-invest in generation and networks.

“Government’s publication of its initial round of REMA confirms what has been known for a long time – the current system is broken and none of the markets can get us to net zero by 2035. REMA is a once-in-a-generation opportunity to ensure that we not only reach net zero on time but that it is done in the most efficient way possible.

“Whilst the need to encourage investment to 50GW of offshore wind gets the most airtime, flexibility will be crucial to balancing the books – flexing demand to give people a better, cheaper electricity service and avoid the need to massively over-invest in generation and networks.

“The newly announced proposals to reform electricity market arrangements are the make-or-break moment to get this right. By 2027, BEIS reckons that it will have locked in a 1/3 of what will still be there in 2035 when the Government aims to have fully decarbonised the system. The clock is therefore most definitely ticking.”