Review of Energy Market Arrangements – Summary of Consultation Responses Published

Review of Energy Market Arrangements – Summary of Consultation Responses Published

The UK government’s REMA team has published its summation of the consultation responses they have received, along with some commentary on their interpretation.

This is very much an interim report from the REMA team, and although a few design options have been jettisoned, almost all the main options are still “on the table”.

Clearly, this is a tough gig for the REMA team. They have had a lot of input and engagement – which is great – but there isn’t as yet an obvious single reform proposal.

If anything, the consensus based on the summary responses seems to be weighed against radical market design options – e.g. nodal pricing or splitting the market – and towards more incremental reforms.

Figure 1 A selection of responses from the REMA consultation – split markets, nodal and zonal pricing are still in the mix despite a largely negative response from industry stakeholders.

Is this a surprise? Perhaps at the outset of REMA there was a belief that the “market is broken” and so only one of the radical options would suffice. But, as we get into the detail, it has become more nuanced.

There are lots of opportunities for reform and enhancement of the current market, some of these are themselves radical and far-reaching (radical incrementalism), but the case for a fundamental market re-design is less clear.
This could be industry intransigence, but it may also reflect a conclusion that the market design isn’t the main barrier to net zero, or at least there isn’t a magic market solution that will get us there. Having a plan, maintaining investment momentum, accelerating the building of infrastructure, political commitment and ensuring affordability are perhaps more important.

The REMA team seem to have picked up this vibe, including recommendations that Regen submitted, so it’s good to see the acknowledgement that wholesale market reform needs to tie into other areas – strategic planning, infrastructure, the consumer, retail etc.

Most options remain on the table but, judging from recent REMA workshops, the process of distillation to what is really needed, is about to get a lot tougher. It is also positive that implementation and the risk to investment have now been elevated as key criteria in the selection process.

Regen responded to the original consultation back in October, which you can read here. Since then, we have been in regular contact with the REMA team including participating as a member of the “Market Participant Forum”.  Overall, we have found it to be a very useful and constructive exercise, and a great opportunity to engage with government officials and to share ideas with other industry stakeholders.

We will continue to update you as things progress. In the meantime if you have questions, comments or insight please share these with Ellie Brundrett (ebrundrett@regen.co.uk) and Johnny Gowdy (jgowdy@regen.co.uk)