Don’t rush wholesale market reform, urges Anderson

The government must avoid making rushed changes to the electricity wholesale market, Keith Anderson has urged.

Next Monday (10 October) will mark the end of Department for Business, Energy and Industrial Strategy (BEIS) consultation on its Review of Electricity Market Arrangements. The Scottish Power chief executive told Utility Week at this week’s Conservative Party conference that the document’s proposals to split up current electricity wholesale arrangements must be handled with care.

At a fringe meeting, organised by the Social Market Foundation, he said: “It is important not to rush it. I understand why speed is high up the agenda for the government, but you are playing with an incredibly complicated market.

“It sounds easy to do but it is not and you’re playing about with people who have invested in projects on the back of promises and guarantees that were to last 15, 20 25 years. You cannot afford to get this wrong and it needs to be done incredibly carefully.”

Anderson’s concern about the risks of the government rushing the wholesale market review in order to ease pressure on consumer bills was backed by a string of senior industry figures at the conference.

Dhara Vyas, director of advocacy at Energy UK, told another fringe event organised by the industry trade body that it is understandable that the government is facing pressure to reform a market in which costly gas tends to set the price for other and cheaper forms of generation.

“It’s really important that the review of electricity market arrangement is done in a considered way with all the right economic analysis and policy impacts because it’s potentially really big.”

Rushing the process could result in an outcome similar to the Electricity Market Reform, which she said that had not gone as far as many had wanted, she said: “It’s a delicate balancing act but there are potential unintended consequences that could end up quite costly if we rush it.”

Benet Northcote, deputy chair of the Conservative Environment Network, raised concerns at another fringe meeting that splitting out renewables from the wider wholesale market could reduce liquidity in the market with a knock on impact on investment.

Jim Watson, professor of energy policy at University College London, expressed “fear” at the same meeting that the REMA process will be rushed.

He said: “It’s really important to separate what you can do in the short-term to renegotiate contracts for some of the older renewables and nuclear, which will have a more immediate effect, and these longer-term reforms that probably takes three to five years to actually plan and implement.”