Locational pricing and rewarding flexibility
For example, a single wholesale electricity price could potentially be replaced by varying prices according to location, with lower costs for those near to where green energy is being generated or stored. This approach was recently endorsed by the National Grid and is already used in some parts of the USA, New Zealand and Canada.
Policymakers will also explore the way the system rewards energy users for ‘flexing’ their consumption away from the grid peak times (for example through reducing consumption or using on-site solar or battery storage), by regularly updating prices for peak and off-peak demand and supporting the rollout of smart digital technologies that autonomously respond to pricing signals. This will help to balance power demand, which is expected to at least double over the next 13 years.
‘Profound transformation over the next decade’
The government says it will engage extensively with the energy sector to develop and assess options for reform, with an initial response expected to be published this winter.
Barnaby Wharton, director of RenewableUK’s Future Electricity Systems, said: “The electricity system will go through a profound transformation over the next decade as we continue to expand our renewables capacity. It’s vital that we have a market which supports investments in new projects and infrastructure and allows consumers to get the full benefits of a low cost, low carbon system.
“This consultation is an important step forward in that process, and the industry will continue to work closely with government on building the clean energy system which the UK needs to reach net zero as fast as possible.”
