UTILITY WEEK | AUGUST 2022 |
5
KNOWLEDGE WORTH KEEPING
Subscribers to Utility Week can access
premium content and exclusive research at
the Download section of our website.
http://www.utilityweek.co.uk
Market reform is essential
– but it will not come easy
According to the 19th century Scottish essayist Thomas Carlyle, reform is "not pleasant, but
grievous".
It's an opinion we have heard a lot through our conversations as part of the Energy Reset
campaign in relation to reforming wholesale electricity markets but always accompanied by
the caveat that it is an essential process.
A er years of lobbying from sections of the industry, including through Energy Reset,
the government has now - nally added some details to its promise of a Review of Electricity
Market Arrangements (REMA) in Great Britain (see Review, p6).
The wide-ranging report makes it clear that it is "keeping most options on the table" as
part of the review and fully accepts there are fundamental questions still to answer over
some of the options it is about to consider.
Energy secretary Kwasi Kwarteng described REMA as no less than "the biggest electric-
ity market shake-up in decades". And yet, even this grandiose statement underplays the
potential scale of this operation. To recalibrate the wholesale market so that it accurately
and dynamically re‰ ects the price of a renewably powered grid is likely to have an impact on
all markets, mechanisms and technologies involved from generation to supply of electricity,
whether directly or indirectly.
Even more signi- cantly, the diŠ erence with this market reform is the direct impact it will
have on customers. This is especially pertinent when considering a move to locational pric-
ing – either through a nodal or zonal approach. Just days before the publication of the REMA
consultation, Kwarteng had already expressed his fears about a postcode lottery developing
if customers in parts of the country where renewables are abundant end up paying much
lower bills than areas unsuitable for large-scale deployment of low-carbon generation.
As David Blackman's analysis on p14-15 shows, there are also concerns about how
politically viable it is to navel gaze around market reform technicalities while energy prices
continue to soar to unsustainable levels.
This leaves the Department for Business, Energy & Industrial Strategy (BEIS) in an
unenviable position. It has quite correctly committed to examine all the options available
for market reform but will come under intense pressure to translate the insight it receives
into tangible actions very quickly. This could take the form of more basic stop-gap options in
the short term that have an obvious link to reducing bills, with longer-term changes tackled
under a separate workstream. It could also, as the analysis points out, result in BEIS duck-
ing di– cult decisions because they are simply too hard and politically sensitive.
BEIS should be applauded for producing a credible, comprehensive and accessible
overview of the problems facing the electricity market and a range of solutions. Of course,
the department now needs to carefully consider the responses but the next step must be
decisive and bold. The worry is that in a period of yet more political uncertainty, decisive-
ness may be in short supply.
James Wallin, editor, jameswallin@fav-house.com
Meet the Editorial Team
Learn how Utility Week membership can build
confi dence in your team's decision making -
speak to our membership team today on
e: jonikiforov@fav-house.com;
t: 01342 332077
Editor
James Wallin,
e: jameswallin@fav-house.com;
t: 01342 332015
Intelligence editor
Nadine Buddoo,
e: nadinebuddoo@fav-house.com;
t: 01342 332054
Features editor
Lucinda Dann,
e: lucindadann@fav-house.com;
t: 01342 332083
News editor
Tom Grimwood,
e: tomgrimwood@fav-house.com;
t: 01342 332061
Innovate editor
Stuart Stone,
e: stuartstone@fav-house.com;
t: 01342 332001
Senior reporter
Adam John
e: adamjohn@fav-house.com;
t: 01342 332069
Water correspondent
Ruth Williams,
e: ruthwilliams@fav-house.com;
t: 01342 332069
Policy correspondent
David Blackman,
e: davidblackman@fav-house.com
Dragos
European industrial infrastructure
cyber threat perspective
https://bit.ly/3zQRw6U
BJSS
Digital Innovation in Energy,
Commodities & Utilities
https://bit.ly/3aIWWHa
Letter from the Editor
James Wallin
Tusker
The future is electric: how you can
offer your staff EVs. t
https://bit.ly/3cnCtbl
Tusker
