Renewables
Andre Gentil-Kraatz
Aurora 2024 Renewables & Batteries Summit in ...
Aurora 2024 Renewables & Batteries Summit in Berlin
Renewables
Andre Gentil-Kraatz
Wood Mackenzie London Renewables Briefing 2024
Wood Mackenzie London Renewables Briefing 2024
Renewables
Andre Gentil-Kraatz
Reform of network charges in the UK

TLDR: Network charges need to be reformed because they are not set up for a world with many renewable energy generators. However, no major changes will be introduced before the REMA process concludes.

Reform of network charges in the UK
Renewables
Andre Gentil-Kraatz
WFW Spotlight Series: Germany

The Watson Farley & Williams (WFW) spotlight series of events highlight one country at each event, and the panellists discuss the status of the renewable market in that country at a high level.

Germany was one of the first European markets to support renewable energy projects but still heavily depends on coal and lignite for power generation. Last year, the remaining nuclear plants were switched off, and the government is committed to phasing out coal and lignite by 2030 as part of the energy transition.

WFW Spotlight Series: Germany
Renewables
Andre Gentil-Kraatz
Consultation on the UK’s new long-duration ...

The Department for Energy Security and Net Zero (DESNZ) wants to design a new policy framework to support these types of projects and has launched a new consultation process on 9 January 2024.

Market participants have until 5 March 2024 to give their feedback on the proposals.

Consultation on the UK’s new long-duration storage framework

REMA

Summary of REMA update February 2025

Source: DESNEZ

DESNEZ hosted a webinar on 06 February 2025 to provide an update on the REMA process. This was the first update since December.

Timeline

The plan is to decide on which policy options will be implemented by mid-2025.

  • The decision will be aligned with CfD AR7.

  • New consultations will be launched toward the end of 2025 on how to implement the selected policy option best

  • No final decision has been made so far.

National Pricing

REMA reforms would be in addition to the NESO reforms, and the following options are still under consideration:

  • Reform of the TNUoS charges to send stronger locational signals and link the charges to the “planned” network build. —> This would mean that ofgem has to abandon their new “cap and floor” model.

  • Incremental reform to the balancing arrangements in cooperation with NESO:

    • Reduce the settlement period duration

    • Introduce a less attractive last-minute imbalance price to make it less attractive to “game the system.”

    • “Physical notifications” must match traded positions

    • Incentivise market participants to “self-balance” when the system is tight

    • Lower the capacity threshold for assets to force more of them into the balancing market

    • Introduction of pay-as-cleared mechanism

    • Align gate closure and market trading deadline

  • Only new storage assets can receive non-firm grid connections

  • Make greater use of Strategic Planning

  • Give NESO new tools to manage interconnector flows

Zonal Pricing

DESNEZ is considering this topic from a whole-system approach and would either introduce zonal pricing or choose to send location signals through TNUoS.

  • DESNEZ is looking at the Nordics as an example of zonal pricing mechanisms

  • Price zones would be set to match the actual transmission constraints in the GB Power market

  • A day-ahead auction would be introduced for intra-zonal trading, with the available transmission capacity acting as a limit for how much can be traded

  • Each price zone would have its own balancing market

  • Financial Transmission Rights (FTRs):

    • FTR Obligations, the holder receives payment equal to the positive market price differential between the source and sink zones, but the holder is obliged to pay the price difference when the price differential is negative.

    • FTR Options, the holder receives payment equal to the positive market price differential between two areas, but the holder does not have to pay when the price differential is negative.

Legacy Contracts

DESNEZ is aware that all reforms would affect legacy contracts and assets and reforms will take several years to be implemented.

  • CfD assets would be protected for the length of their remaining tenor

  • A bespoke financial protection scheme is under consideration for other assets that would be a separate contract that has to take locational volume into account. This might require separate legislation for implementation, and it would be challenging to calculate the revenue impacts of the reforms.

  • Policy decisions will influence the design of CfD AR7 to include potential risk mitigations