Review of electricity market arrangements (REMA)

Review of electricity market arrangements: The need for reform

The UK’s electricity market is currently facing a number of challenges that require reform in order to ensure reliable, affordable and sustainable energy for the future.

The name of the new government department speaks to two key challenges in particular: decarbonisation and security of supply.

Achieving the UK’s ambitious targets to reduce its greenhouse gas emissions to net-zero by 2050 requires a transformation from fossil fuel generation to renewable energy, which the current electricity market is not designed to support. At the same time, the closure of fossil fuelled power plants and move to ‘decentralised’ and intermittent renewable generation challenges system’s ability to provide a reliable and uninterrupted supply of energy to consumers.

Other drivers for reform include:

• the significant investment needed to modernise and maintain the UK’s aging electricity infrastructure
• the domination of the electricity market by a small number of large suppliers, which can lead to reduced competition, higher prices for consumers, and a lack of innovation
• the volatility of the wholesale price of electricity, which can make it difficult to plan and invest in new capacity
• failure of the current system to protect vulnerable customers and ensure that energy is affordable and accessible for all.

Review of electricity market arrangements: Next steps

The government will take forward a number of options for further assessment. As part of its review of electricity market arrangements, we can expect it to publish a second consultation in 2023 and it may take decisions sooner on shorter-term reforms where viable. It has stated that its decisions will be driven by whole system considerations which account for the needs of all energy market participants, with a high weighting for future considerations.  It also recognises the need to better consider the potential impacts on consumers and has instigated an “end-user forum” to this end.

How Walker Morris can help

The focus on net zero and energy security presents both risks and opportunities for businesses operating in the energy sector and the wider economy. Walker Morris’ dedicated Infrastructure & Energy team can help businesses to successfully navigate all aspects of the net zero agenda, including compliance with the changing framework for electricity infrastructure and supply. We can help in an advisory capacity, keeping you fully informed as to legal/regulatory requirements, and we can help with policy/procedure reviews, corporate reporting, contractual negotiations, and with drafting new contractual arrangements or variations as required. Walker Morris can provide comprehensive, cross-disciplinary advice, whether in relation to strategic risk management or transactional assistance, as well as tailored staff training on any net zero-related area or issue.

If you would like any further information, or to discuss any legal issues relating to the review of electricity markets (REMA) and potential reform, please contact Ben Sheppard or any member of the Infrastructure & Energy team.