Fixing suppliers can’t hold up market reform, Glover warns

Reform of the UK energy market’s design cannot wait for problems on the supply side to be sorted out, RWE’s UK chair has warned.

Speaking at Aurora Energy’s Spring Forum in Oxford, Tom Glover said a robust supply market is a “fundamental building block” in giving investors confidence to back generators like the German multinational.

But wider reforms cannot be held up by those needed in the retail market, he said: “We’ve been waiting 10 years for the retail sector to try and get itself sorted out. It’s a basket case and I have no faith it’s going to get sorted out in next five or 10 years but I’ve got to deploy £15bn in the UK in the next eight years.

“I don’t believe we’re going to sort out the supply side very quickly and not in the time scale I need to invest and so I’m afraid I do end up in a centrally planned world,” Glover said, adding that the development of hydrogen and CCUS (carbon capture, use and storage) would also require a more planned approach to delivering energy infrastructure.

Glover also warned that a “big bang” style review of the wholesale electricity market risks disrupting investment in the sector.

He said: “Whatever you decide to do on the market needs to give investors certainty. You need to be pragmatic and not try to be really academic about it: it needs to be very clear for an investor what it means.

“The big challenge I have is ultimately I need to put a number in a spreadsheet for every year of what I think the revenue is going to be.”

Noting that uncertainties over UK policy means that he is struggling to put down such figures for the early 2030s, Glover said: “That is the fundamental thing that’s going to stop investment.”

Rather than undertaking the kind of radical overhaul which the government is exploring in its REMA (review of electricity market arrangements) consultation that was published last year, Glover called for more incremental changes initially. He said: “You don’t knock down a house and rebuild it if you can fix it. ”

RWE’s own modelling suggests that fixing the Electricity System Operator’s Transmission Network Use of System (TNUoS) charging regime could increase the new generation capacity that the grid can accommodate.