www.sghmartineau.com Energy Market Reform in Great Britain The evolution of a market
Feb 17, 2016
www.
sghm
artin
eau.
com Energy Market Reform in Great Britain
The evolution of a market
www.sghmartineau.com
The evolution of a market
• The Electricity Pool• NETA• BETTA• EMR
www.sghmartineau.com
The Electricity Pool
• Government-sponsored initiative - privatisation
• Mandatory pool – Pooling & Settlement Agreement
• Pool pricing and capacity price• Contracts for difference• NFFO• E&W only – separate arrangements for
Scotland and NI
www.sghmartineau.com
From Pool to NETA
• RETA process• POOL successes• Security of supply• New investment• Retail supply competition
• Pool failures• High prices• Gaming• Inflexible governance
www.sghmartineau.com
NETA
• Bi-lateral contracts• OTC trading• Power exchanges
• Balancing• Balancing & Settlement Code• Bids and offers• Imbalance charges
• Renewable Obligation
www.sghmartineau.com
BETTA
• Extension of NETA to Scotland• Operation and development of GB Grid• NGC’s role• Scottish TOs
www.sghmartineau.com
Need for (further) Electricity Market Reform?
• Twin challenges of climate change and energy security• Decarbonising the ESI• Diversifying energy supply
• Incentivising investment• Step change in investment required• Inadequate incentives under NETA
www.sghmartineau.com
Key FeaturesContracts for Difference
• Replacement for the Renewable Obligation
• “Price Certainty”
• Role of the Counterparty
The Capacity Mechanism
• Insurance Policy
• Contract Auction
• A more integrated European Market
www.sghmartineau.com
New Limitations & Enhanced MonitoringEmissions Performance Standard• Annual Limit• “Grandfathering”• Dash for gas?
The Office of Nuclear Regulation• An independent body• Five areas of
responsibility
New Institutional Framework• Administration and
delivery of EMR• Role of National Grid• Role of Ofgem
www.sghmartineau.com
Conclusions
• Continual need for market intervention• Importance of price signals/incentives• Regulatory risk