REMA Summer Update: ‘No’ to zonal pricing, ‘yes’ to reformed national pricing

Global | Publication | julio 2025

On 10 July 2025, the UK government published its Review of Electricity Market Arrangements (REMA) Summer Update, which sets out the long-awaited outcome of the REMA programme and next steps towards a decarbonised, affordable, secure and efficient electricity market.

Key decisions
Other takeaways
Discounted options
Next steps

Key decisions

Retention of a single GB-wide national market: The government has confirmed that Great Britain will retain a single national wholesale electricity market, rejecting the introduction of zonal pricing. This decision was made to maintain simplicity, avoid regional disparities in pricing and to preserve investor confidence. The market will, however, be reformed through a series of interventions (discussed below) designed to give better locational investment signals and improve the operation and management of the electricity system whilst maintaining investor certainty and reducing costs.
Strategic system planning: To foster a more coordinated and whole system approach to planning and developing the electricity system, a Strategic Spatial Energy Plan (SSEP) will be developed, led by the National Energy System Operator (NESO), to guide the optimal location, quantities and types of electricity and hydrogen generation and storage infrastructure needed to transition to a cleaner energy system and promote anticipatory network investment. The government regards the SSEP as the centrepiece of the reformed market that will be implemented alongside other important levers, such as: planning reform, seabed leasing (allowing new offshore projects to be brought forward and sequenced), network build (through the Centralised Strategic Network Plan (CSNP) – a 25-year plan for transmission network infrastructure), reforms to the connections regime, and reforms to network charging.
Transmission network charging reform: The Transmission Network Use of System (TNUoS) and connection charging regimes for generation, storage and demand will be reformed with the view to sending better locational signals (e.g. through deepening connection charges) and making TNUoS more predictable.
Operational efficiency: To improve the operational efficiency of the electricity system and reduce costs associated with managing network constraints, a combination of improved balancing and settlement arrangements and constraint management measures will be introduced. Areas of potential reform include: lowering the threshold for Balancing Mechanism (BM) participation (to allow smaller scale generation/storage projects to participate in the BM); aligning the electricity market trading deadline with ‘gate closure’ (to give NESO more certainty for real-time balancing); matching of Physical Notifications (PNs) submitted by generators to their trade position (to give NESO better visibility of overall supply and demand); unit-level bidding (to support a level playing field between small and large market participants); shortening the settlement period to 15 or 5 minutes (to promote greater market participation and reduction of costs).

Other takeaways

Government support: The government has yet again confirmed that support for individual projects will continue to be allocated through competitive schemes, including the Contracts for Difference and Capacity Market mechanisms.
Constraint management: The government will work with NESO and stakeholders to deliver constraint management measures through the Constraints Collaboration Project (CCP). The CCP was launched in 2024 with the view to finding solutions for dealing with transmission thermal constraints in the short term whilst reducing consumer costs and curtailment of renewable generation. Demand customers are expected to play an important role and could be incentivised to locate behind areas of constraint through long-term contracts with NESO giving them access to below market electricity prices if they increase their demand and/or provide additional baseload demand during periods of constraint. This could be beneficial to demand customers that are able to provide such a service, e.g. hydrogen producers, data centres, industrials and energy storage.
Data centres: The government has confirmed its commitment towards supporting large electricity users such as data centres whilst ensuring that they are located in places that deliver the best outcomes for the electricity system.

Discounted options

Zonal pricing: The government has decided against zonal pricing due to its complexity, uncertainties both for investors and in terms of creating stable long term locational investment signals for new generation, and distributional challenges. Also, the government has estimated that it would take seven years to implement it, thereby delaying the potential benefits of a zonal pricing reform.
Dual-imbalance pricing: Dual-imbalance pricing will not be re-introduced as it could make imbalance prices less reflective of actual system costs.
Quasi-pay-as-clear BM: In order to encourage flexible energy sources (such as batteries and demand response) to take part in the balancing market, the government was considering introducing a system where certain balancing actions are paid based on the higher of the imbalance price and the accepted bid/offer price. This option has been discounted in favour of lowering the threshold for BM participation (as discussed above).

Next steps

Later this year, the government will publish a Reformed National Pricing Delivery Plan and a separate consultation on changes to the Capacity Market.
The first iteration of the SSEP is due to be published and consulted on in late 2026 and thereafter reviewed on a three-year cycle.
Ofgem will shortly publish an open letter which initiates the review of TNUoS. The aim is to deliver the TNUoS reform as soon possible within this Parliament, and by 2029 at the very latest.
Later this year, NESO will launch a consultation process on changes to the balancing and settlement arrangements and undertake an impact assessment.
Ofgem is expected to receive the final report on code modification P462 in 2026 that would remove subsidies from bid prices in the BM.
Call for evidence is to be published exploring how the Corporate Power Purchase Agreement (PPA) market can be further developed.