Exploring Market Change in the GB Electricity System: the Potential Impact of Locational Marginal Pricing - Stakeholder Insight Report

There is growing awareness of the importance of electricity market frameworks in supporting the delivery of key Government ambitions in Britain including delivery of net zero across the economy. The ongoing UK Government Review of Electricity Market Arrangements (REMA) explores a wide variety of options including the concept of Locational Marginal Pricing (LMP). This option has gained significant attention in the sector, with advocates arguing that it will provide incentives to provision of ‘flexibility’ on the power system and reduce the impact of network constraints on the cost of energy.

This report forms part of an independent review exploring LMP, how it might be applied in Britain and how the costs and risks faced by different market participants might change were it to be introduced. Ten semi-structured expert interviews were conducted as part of the project. Interviewees included multiple domain experts active in the GB energy policy and electricity market reform debate. Additional views were gathered from experts from the USA, discussing existing implementations of LMP, and Australia, discussing their own consultation on market reform and debate around transitioning to a nodal LMP market. This wide range of stakeholders included representatives with current or previous experience spanning market design and regulation, investment in generation and storage, system operation, research, consultancy and government. Interviews were conducted under ‘Chatham House’ rules and this report provides an anonymised summary of the key points that were raised across a range of topic areas.

This stakeholder report is supplemented by 'Exploring Market Change in the GB Electricity System : the Potential Impact of Locational Marginal Pricing', available: https://doi.org/10.17868/strath.00083869