On Thursday (10 July), the UK government announced its long-awaited decision on Zonal Pricing, informing industry of its intention to retain a single national Great Britain (GB)-wide wholesale electricity market and conclude its review of Zonal Pricing. The announcement was part of the government’s summer REMA update.
What is the Review of Electricity Market Arrangements (REMA) and the Zonal Pricing Review?
The Review of Electricity Market Arrangements (REMA) was established in 2022 to ensure that the GB electricity market arrangements support a decarbonised, cost-effective, and secure electricity system fit for the future.
The REMA program considered a wide range of reforms designed to deliver the level of investment needed to reach the GB’s clean power ambitions. To transition towards a flexible, resilient, and secure decarbonised system, while passing through the value of a renewables-based system to consumers, and optimise and operate a renewables-based system cost-effectively.
What is the latest update for REMA?
In previous REMA updates, the government advised that they were considering two approaches for reforming the wholesale electricity market.
- Zonal Pricing, where the electricity wholesale market would be split into several zones across the GB.
- National Pricing system to be reformed, where a single national price would be retained in the wholesale market, alongside substantial reforms and greater strategic and planning coordination.
The key decisions from the latest announcement include:
- A single National Pricing (GB-wide) wholesale electricity market will be retained.
- A package of reforms is to be introduced to improve the effectiveness of the national pricing system.
What does the Decision to retain a National Wholesale Electricity Market mean?
In conclusion the government has decided to retain a single national GB wide, wholesale electricity market to maintain market consistency, providing a constant wholesale price with a stable framework, to focus on improved investment signals for new generation assets and increasing operational efficiency with plans to modernise outdated infrastructure and to offer continued de-carbonisation support for timely delivery of new renewable generation.
The Government concluded that whilst both Zonal Pricing and reformed National Pricing can address the key challenges faced in the wholesale market, there are significant risks to Zonal Pricing that have not been satisfactorily addressed compared to the preferred approach of reforms to National Pricing.
What Next?
The Government has announced it will continue to develop the package of reforms and set out how these measures will be delivered in a ‘Reformed National Pricing Delivery Plan’ to be announced later this year. This will include a delivery timeline with key activities for implementing reformed National Pricing and an overview of the legislation required to deliver this reformed National Pricing package.
Where can I find more information on REMA?
Further information on the Review of Electricity Market Arrangements (REMA) can be found on the GOV.UK website.
How can NUS Consulting Group help your organisation?
With the increasingly complex and changing regulatory landscape, NUS Consulting Group’s team of energy specialists has been supporting UK businesses for over 60 years. If you would like to discuss how our specialists can support your organisation, please contact us.