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Energy Market Reform in Great Britain

Energy Market Reform in Great Britain. The evolution of a market. The evolution of a market. The Electricity Pool NETA BETTA EMR. The Electricity Pool. Government-sponsored initiative - privatisation Mandatory pool – Pooling & Settlement Agreement Pool pricing and capacity price

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Energy Market Reform in Great Britain

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  1. Energy Market Reform in Great Britain The evolution of a market

  2. The evolution of a market • The Electricity Pool • NETA • BETTA • EMR

  3. 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

  4. From Pool to NETA • RETA process • POOL successes • Security of supply • New investment • Retail supply competition • Pool failures • High prices • Gaming • Inflexible governance

  5. NETA • Bi-lateral contracts • OTC trading • Power exchanges • Balancing • Balancing & Settlement Code • Bids and offers • Imbalance charges • Renewable Obligation

  6. BETTA • Extension of NETA to Scotland • Operation and development of GB Grid • NGC’s role • Scottish TOs

  7. 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

  8. Key Features Contracts for Difference The Capacity Mechanism Insurance Policy Contract Auction A more integrated European Market • Replacement for the Renewable Obligation • “Price Certainty” • Role of the Counterparty

  9. New Limitations & Enhanced Monitoring Emissions Performance Standard New Institutional Framework Administration and delivery of EMR Role of National Grid Role of Ofgem • Annual Limit • “Grandfathering” • Dash for gas? The Office of Nuclear Regulation • An independent body • Five areas of responsibility

  10. Conclusions • Continual need for market intervention • Importance of price signals/incentives • Regulatory risk

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