National Grid has responded to an AFRY study, which found moving to locational pricing in UK electricity market would be “high risk for little reward”.
A spokesperson for National Grid said that “market reforms need to be consistent with investing what we need, where and when we need it”.
It comes as AFRY completed a review of electricity market arrangements in Great Britain, in response to a government consultation.
The engineering firm reported that changing to a zonal or nodal market “could dent investor confidence and comes with little modelled benefit”.
In addition it said that “investor confidence is particularly important considering the recent offshore wind auction that received no bids, in the context of the target to decarbonise the power system by 2035 and the limited window to do so”.
Due to the risks associated with changing the market design radically, a more evolutionary approach to improving to market arrangements is recommended, AFRY said.
The study was initiated in response to the electricity transmission operator National Grid’s 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.
The study was sponsored by 12 clients, including Drax, Greencoat, Octopus, RES, RWE, Shell and SSE.
A spokesperson for the National Grid said:
“AFRY’s latest report provides important new evidence for the debate over zonal and national electricity market design.
“As the industry mobilises tens of billions of pounds over the coming years, market reforms need to be consistent with investing what we need, where and when we need it. Reforms to connections and Strategic Spatial Energy Planning alongside market reforms can best deliver UK energy security, ensure lower energy bills, and help decarbonise power to meet the Clean Power targets.”
Image courtesy of National Grid
