National and Zonal electricity market designs for Great Britain
When
12:00-13:00 BST on Friday 24th May 2024
AFRY study finds the case for zonal pricing hinges on delivery of strong risk management frameworks
In response to the UK government’s recent consultation, AFRY has completed a review of electricity market arrangements in Great Britain, related to the challenges of operating and optimising a fully decarbonised power sector by 2035. The study found that reforms could provide improvements in some but not all criteria compared to the current business as usual while a move to a zonal market could be the best option in the long-term, deliverability of the transition could mean that proceeding with an Enhanced National market is the most attractive option overall. Centralised dispatch options fared less well on both deliverability and enduring robustness.
The possible benefits of improved operational efficiency from revised market arrangements have to be weighed against potential increases in investment risk. A decentralised zonal market should only be implemented if accompanied by an extensive risk management framework and grandfathering of existing rights to deal with wealth transfers.
Read the Summary Report here.
Background
AFRY has undertaken a 6-week study, in response to the second REMA (Review of Electricity Market Arrangements) consultation published in March 2024. The study builds on work previously undertaken in 2022-2023 by AFRY. The work was initiated in response to the electricity transmission operator National Grid’s (ESO) programme for net zero reform, and the Review of Electricity market Arrangements (REMA) process, which was launched by the Department for Business, Energy & Industrial Strategy, now the Department for Energy Security and Net Zero (DESNZ) in July 2022.
Find out more about AFRY's previous work related to REMA here.
AFRY Management Consulting works globally on market design and provides commercial analysis, strategic and operational advice for private investors and operators. With experience of a wide range of global electricity markets, AFRY Management Consulting experts possess a deep insight into the merits of alternative electricity market designs.
