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Review of Electricity Market Arrangements (2022)

We welcome this consultation and broadly agree with the five bullet point headings set out in the document. We express the importance to recognise that as the energy system in 2035 will look significantly different – there are some specific issues and outcomes which needed to be addressed, explicitly as ‘success criteria’ with any future market changes.

  1. Recognition that creation of a market for the right types/mix of flexibility services must be a primary outcome of this exercise.
  2. The growing role of distributed resources in securing a least-cost energy system and ensuring that we design to optimise their participation.
  3. A heightened need to ensure security of supply and resilience, given the numerous challenges.
  4. Aligning market ambition with the significant challenges of building network infrastructure quickly enough to facilitate the scale of change required.
  5. As locational pricing is an important theme in this consultation, any move to LMP needs to be aware of the extent to which price signals are acceptable to customers and stakeholders given the huge social focus on energy bills currently.

We also believe there is only value in locational pricing if it drives behaviour. If that is the main reason then timing is a major factor, the kind of decisions that would be impacted (where to live, build a factory etc.) are long-term, so any LMP would need to be phased in over a time frame that is in line with people’s decision making.

We would also reinforce the importance of ensuring a whole-system viewpoint by aligning this work with retail market changes. The REMA scope includes all technologies that currently (or could) participate in electricity markets, but the scope excludes new nuclear; first of a kind project; and other markets e.g., natural gas, hydrogen, and policies for demand reduction.