The government has published a long-awaited consultation on its proposals to reform the UK’s electricity pricing system. This will not only help to meet climate goals, it will reduce electricity costs for businesses and households.
Department for Energy Security and Net Zero, The Rt Hon Claire Coutinho MP, gave a speech in central London to highlight the government’s Review of Electricity Market Arrangements (REMA).
The wide-ranging consultation is focused on establishing a zonal pricing system that will vary wholesale energy prices across the country, based on local levels of energy supply and demand. It also includes proposed incentives for more investment in new gas-fired power plants.
The UK’s energy market currently operates under a marginal pricing system, set by the fossil gas plants for many years, at the price of the most expensive megawatt produced.
Now the cost of developing solar and wind projects has dropped, the proposed new locational pricing system for energy will encourage the growth of renewables in more optimal locations around the country.
The government has also committed to support the building of new gas power stations to maintain a safe and reliable energy source to back up renewables.
These capacity market reforms, along with the switch to renewables, will help to curb energy costs for businesses and households while supporting the UK’s climate goals.
Dave Robson, CEO at InstaGroup commented,
“These proposals are welcomed, and will help the UK transition to an energy system that is compatible with Net Zero and the modern world.”