Thread by @doug_parr

Prime Minister Johnson has just signalled that the UK electricity market is about to undergo the biggest shake up since privatisation over 30 years ago. This will be a major test of their ability to do the right thing whilst keeping the show on the road 🧵

On @BBCr4today just now Johnson said one of the things to tackle cost-of-living crisis was to stop the ‘crazy’ situation that all electricity is paid for at the marginal gas price i.e. it’s all paid for at the price of the most expensive that fulfils UK demand at that moment

Interview here from around 8.10
bbc.co.uk/programmes/m00…

Johnson is right – the system was set up in 1990 when the only things competing were different forms of fossil fuel generation. Nobody then (nor, in fairness, even in 2010) foresaw cheap renewable power. But because of the pricing system the public do not get that benefit

One idea is to have 2 markets, as suggested by @MichaelGrubb9 where most electricity is bought from the low carbon market, with full pass-through of the cheaper #renewables prices, then topped up from a second, more expensive fossil power gen market

For a Prime Minister like Johnson, who is famously not a ‘details’ man, to be quoting this change in a high-profile BBC interview shows he is aware of the issue and that conversations are live in No10 about changing it

There’s an Energy Bill coming to Parliament, possibly as early as next month, and on the basis of this interview as well as other noises around Westminster, I’d suggest there will be legislation to make such a change to the electricity market

This might all seem a bit geeky (and it is), but one impact of the change will be to make cheap #Renewables more attractive to the suppliers of electricity to customers than fossil power, leading to economic pressure for more RE construction. Good news

But warning!!! UK, and many other countries, are trying to deliver major investment e.g. growing from around 11GW offshore wind to 50GW over the next 8 years

Many 10s of billions of ££ will be required. And….

The *details* of what the market structure is going to look like will affect investment decisions.

Yet the investment pipeline needs to be maintained alongside these much needed market reform, a tricky balancing act which I hope current govt is up to

ENDS