A new report has warned that the UK must manage its shift to locational marginal pricing or risk delaying new renewable energy capacity.
The Scottish Futures Trust’s (SFT’s) ‘A Review of Electricity Market Arrangements – a Vision for Scotland’ report claimed that evolution rather than revolution in electricity market arrangements is needed if the UK is to meet its net zero targets.
It said that any move to locational marginal pricing, put forward as one of the main options for reform by UK Government and favoured by some important electricity sector stakeholders, risks a long period of hiatus in significant new renewable electricity generation, at a time when a huge increase is required compared to the past ten years.
The report highlights that whilst some changes to electricity market structures are needed to cope with a system dominated by intermittent renewable generation, this could be achieved through reform of the existing market mechanisms.
The report also states that if investor confidence is not retained, consumers will continue to be exposed to volatile gas prices and fewer jobs will be created in new generation and emerging new sectors such as hydrogen.
Andrew Bruce, Senior Associate Director at the Scottish Futures Trust who leads on this work, said: “This report emphasises that a radical move to locational marginal pricing, at a time of substantial transmission constraints and doubts about the speed of future grid delivery, threatens to choke off or delay the substantial investment required in new on and offshore wind farms.
“The report sets out a clear vision for an alternative system that is compatible with increased investment, reduced curtailment of available power and a just transition to net zero.
“Scotland has a key role to play in delivering the UK’s 2035 target of a fully decarbonised power sector. We have a current renewable energy capacity of 15 GW which needs to increase more than three-fold to at least 50 GW within the next 12 years if the UK Government is to meet its net zero commitments. Scotwind has a critical role to play in this.”