Review of Electricity Market Arrangements: Second Consultation

After a period of unprecedented disruption and change, our energy sector is now poised to seize the opportunities of the energy transition. We have become the first major economy in the world to halve our emissions, and today we are seeking to build on that progress with the review of electricity market arrangements (REMA) second consultation.

The options in this consultation could save consumers tens of billions of pounds. It will ensure that our electricity markets are fit for the future, and to prepare our electricity system for full decarbonisation by 2035, subject to security of supply.

Reforming the electricity market is key to delivering a low-cost system, driving down both the cost of power itself and the infrastructure needed to deliver it to consumers. The first REMA consultation sought views on the case for change, programme objectives, and a wide range of options. This consultation sets out a much sharper vision for our future electricity market arrangements, significantly narrowing down the remaining options.

The reform options in this consultation have the potential to save tens of billions of pounds from consumers’ bills. Doing nothing is not an option. Existing arrangements will get harder to operate and could lock in a high-cost path to transition. Our analysis suggests that reforming our electricity markets could reduce overall system costs by £35 billion from 2030 to 2050.

This is also an opportunity to unlock massive investment in a cost-effective and secure energy system. An estimated £275 billion to £375 billion in new capacity may be required. Achieving this will require the private sector to work alongside the Government, the regulator and the system operator to help design future markets to encourage large-scale investment.

We are also taking the steps necessary to future-proof the country’s energy security and keep the lights on. With electricity demand set to rise and existing gas plants nearing the end of their lives, the Government will support limited new build gas capacity in the short term, for when the sun is not shining and the wind is not blowing. This is a sensible insurance policy, and independent analysis demonstrates that unabated gas generation will continue to play an important part in the 2030s. The Government have already passed laws requiring new gas plants to be built ready to convert to low-carbon alternatives in the future, and running hours will continue to reduce as more renewables come online. This means the plans will not add to projected emissions and are entirely in line with the UK’s world-leading carbon targets.

The next phase of the REMA programme will finalise the remaining policy options. We expect to provide a summary of responses in summer 2024 and move into full-scale implementation from 2025.

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