1. A new report recommends revising electricity market arrangements in Great Britain to adapt to the demands of decarbonizing the power sector by 2035.
2. The report suggests that transitioning to a market with varying pricing across different zones may hold promise in the long run, but an enhanced market with a single national price may be more feasible in the short term.
3. The report highlights the potential for an enhanced national decentralised dispatch market to quickly implement measures for improved operational efficiency, while also cautioning against raising investment risks that could burden consumers with additional costs.
A new report suggests that revising electricity market arrangements in Great Britain to adapt to the demands of decarbonising the power sector by 2035 may be beneficial. The report conducted by energy consultancy AFRY evaluated four potential options for market arrangements in response to the UK’s second Review of Electricity Market Arrangements consultation. The report concluded that an enhanced market with a single national price could be the most feasible option in the short term, even though transitioning to a market with varying pricing across zones holds promise in the long run.
The report highlights that market designs with central dispatch may amplify risks for market participants and encounter challenges in deliverability and robustness. A decentralised zonal market, although promising for operational efficiency, requires a comprehensive risk management framework and safeguarding of existing rights. An enhanced national decentralised dispatch market emerges as the most appealing option due to its potential to quickly implement measures while optimizing operational efficiency.
The report notes that power system costs could increase by 30% in the next decade, and any changes to market arrangements during this period must be cautious to avoid raising investment risks. The UK has made efforts to improve its electricity market recently, such as implementing price regulations and accelerating grid connections for projects. This includes initiatives like the UK Power Networks Distribution System Operator launching a scheme to fast-track grid connections for new power generation projects.