Reforming UK electricity markets

Journal article

The recent OFGEM consultation on gas and electricity markets has been seen as radical and controversial because, in a context of security and sustainability objectives, it questions the effectiveness of the current market structures for the UK energy sector. In this it reaches a very similar set of conclusions to the October 2009 Committee on Climate Change Progress Report to Parliament on Meeting Carbon Budgets. This article concentrates on electricity and argues that, at least for the power sector, OFGEM’s concern is well founded and should imply a radical reappraisal of market arrangements. This is especially important given the central role of the power sector in achieving targets for reduced CO₂ emissions.

If anything the OFGEM arguments for more radical reforms are understated. This paper seeks to:

• examine more critically the sources of the benefits, in lower costs and prices, that have accrued under the post 1990 market regimes;
• consider whether current trading and system operation structures would be technically consistent with the generation technologies likely to form part of the new low carbon energy economy;
• discuss the main market problems posed for securing the investment necessary to meet key objectives of adequate capacity and low carbon sustainability;
• argue that a central purchasing agency for the power sector could deliver the main policy objectives for the sector while retaining the most important features of competitive market structures.

Authors: Rhys, J

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford Institute for Energy Studies
• Journal: Oxford Energy Forum
• Volume: 81
• Pages: 20-23
• Publication date: 2010-05-01
• Edition: Publisher's version
• ISSN: 0959-7727
• Language: English
• Keywords: OIES