The government should step aside and enable innovators to accelerate the transition to a carbon free electricity grid, according to a report.
On 31 March, Energy Systems Catapult (ESC) published Rethinking Electricity Markets, proposing a set of six key reforms that would create a zero carbon electricity grid that works for consumers. While the current set-up has overseen the share of renewables growing from 14% in 2013 to 47% in 2020, it is made up of mechanisms designed for a far less mature market. This was one that needed strong government support, where renewable energy was not yet proven. This framework is now undermining wholesale electricity markets, it continued, stifling the potential of new, smart technologies and risking making it both more difficult and costly for consumers and businesses to switch to greener energy.
It proposed a series of “innovation-friendly” and “consumer-focused” reforms under EMR 2.0 as a means of rectifying this, including the introduction of dynamic and granular wholesale market signals to more accurately reflect system status and physics in real time, and phasing out centralised contracting by the mid-2020s. This includes schemes such as Contracts for Difference (CfD) and the Capacity Market (CM), with outcome-based policy mandates being implemented in place of them.
It also called for the promoting of private-sector led finance, risk management and forward contracting across a balanced resource mix, while reducing reliance on state-led contracting; ring fencing innovation and early deployment support measures to maintain technology neutral energy market signals through the transition; updating sector and digital governance, codes, platforms and standards, rebalancing industry representation and accelerating DSO, ESO and ISO reforms; and linking sector strategy, regulation and policy mandates directly to carbon budget advice and review cycles, strengthening independent market monitoring.