Utility Week

The Month in Review Brearley Pinchbeck 6 | AUGUST 2022 | UTILITY WEEK "This winter will be catastrophic. The hideous spikes in wholesale energy will translate by October into Ofgem setting a price cap for a typical bill of around £3,000 a year – close to four times what some paid just two years go. It will push millions into poverty." Martin Lewis, Money Saving Expert founder The Month in Review T he government said it was "keeping most options on the table" on whole- sale market reform, including introduc- ing locational pricing and having separate markets for firm and variable power. These are among a bevy of options put forward in a consultation on the Review of Electricity Market Arrangements (REMA). The consultation, which was promised in April's Energy Security Strategy, covers options for reforming the wholesale market and Balancing Mechanism, as well as the evolution of, or alternatives to, the Contracts for Difference (CfD) and Capacity Market. The Department for Business, Energy & Industrial Strategy (BEIS) said REMA would run alongside the refresh of its energy retail strategy, noting that many of the options under consideration would require an expanded role for suppliers. This could include an obligation on suppliers to directly procure green electricity either straight from generators or through an intermediary. The consultation is the first part of a process that will see BEIS engage with the sector over what reforms are needed this year and next, with a delivery plan to be implemented from "the mid-2020s", aimed at driving forward the pledge of creating a net-zero power system by 2035. Introducing what he described as potentially "the biggest electricity market shake-up in decades", energy secretary Kwasi Kwarteng said these markets would be "the backbone of this future electricity system". He added: "So it is critical that they are designed right, with renewables (and the wider ecosystem they require) in mind. The last major programme of electricity market reform was 10 years ago, and it le• some key parts of our market structure unchanged from the time when fossil fuels were the dominant source of energy. It is time to look again at whether they are fit for purpose, or whether reform is needed to deliver a clean, secure and low cost energy system for consumers." James Wallin, editor For a full rundown of the options, go to https://utilityweek.co.uk/beis-unveils-biggest- electricity-market-shake-up-in-decades. See p.14-15 for reaction and analysis. 'Biggest electricity market shake-up in decades' Offshore wind needs £54bn grid upgrade Up to £54 billion of new grid infrastructure will be required to deliver the government's target of 50GW of offshore wind by 2030, National Grid Electricity System Operator (ESO) has calculated. In a landmark report, the ESO outlined the pathway for the transmission network upgrade that it said would be needed to enable this increase in offshore wind. This includes the Holis- tic Network Design (HND), which is intended to provide a more coordinated approach to developing the network than the point-to-point con- nections with the onshore grid that offshore wind farms currently rely on. This "radial" model is "no longer fit for purpose without potentially risking avoidable impacts on consumers, the environment and communi- ties", according to the ESO. The £54 billion includes 94 reinforcements of the onshore transmission network, worth £21.7 billion, and £32 billion for offshore infrastructure, including £7.6 billion of addi- tional capital costs for deliv- ering coordinated rather than radial connections. The offshore transmis- sion infrastructure includes four subsea cables to con- nect wind farms in Scotland and England with the biggest sources of demand in London and the South East. Firm and variable power could be allocated to separate markets

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