Report: 2020 ‘petri dish’ reinforced need for new market design and independent operator

Anyone who doesn’t think that the sixth carbon budget was a step up in decarbonisation ambition for the energy sector and anyone who doesn’t think that is “stark staring mad”, Tom Corcut, Ofgem’s deputy director for wholesale markets, said during NGESO’s update on progress towards operating a ‘net zero’ system. Speaking at the event, which updated stakeholders on NGESO’s pathfinders and new products, he said the experience of operating the system last year was a “petri dish” and “the case for change is being set out in the market now”.
Corcut said redispatch was increasing year on year, highlighting settlement periods last year that saw 80% redispatch, saying “the physical market is out of sync with the financial market”. That meant the market needed a redesign, he said. The electricity system operator should play a leading role in that design, because “if you have to operate it you have to understand it”. Ofgem would like to see that done by a fully independent system operator, along with BIES and Ofgem, but “we are not quite in that world”.
He said a new design would need more signals for flexibility – both time and location – and that might include locational marginal pricing, changes in transmission or distribution ‘use of system’ charges or a combination. Changes were likely to be targeted, rather the taking a whole-system approach, because it was “hard to rein back” from existing change programmes, and as a result security of supply issues had to be considered.
Corcut highlighted local markets, saying they would become more important, including local flexibility markets and bilateral contracts with DSOs to manage constraints. And he raised questions both over how local markets would work with national markets and who would operate them, saying it was the focus for lots of work in NGESO. What are the roles and responsibilities of the ESO and DSOs and other players, he asked? Who runs DSO to DSO interactions, or those between DSOs and the ESO?

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