Modelling alternative policy mechanisms to deliver decarbonisation, flexibility and reliability in the GB power market.

Tender description

As part of the next stage of ESC's Rethinking Electricity Markets (REM) initiative, the ESC wishes to appoint a suitably qualified consultant to conduct a market simulation for the GB power market, exploring the impact of: • replacing CfDs for mature technologies with a decarbnisation obligation on suppliers in order to guarantee decarbonisation of power by 2035. See our recent blogs on this topic: Can we make electricity markets work better - or is ambitious reform all just too risky to contemplate; and Can we mandate electricity market to deliver a decarbonised grid by 2035?; • replacing the centralised Capacity Market with Strategic Reserves (and extra option, also Decentralised Reliability Options). See "Broad Model for a CRM in an Energy Service Provider-led market" As part of its Rethinking Electricity Markets (REM) thought leadership initiative, the ESC has developed proposals to reform electricity markets and market mechanisms so that they bring forward innovation and investment in a more efficient mix of low carbon generation, network enhancements and flexibility. The focus of our work has been on understanding how detailed mechanisms fit together to signal value and identifying the strategic choices around how to 'get prices right' across the system and the value chain. Our approach focuses on the need to evolve the policy framework in a way that guarantees policy outcomes (i.e. decarbonisation; reliability) while avoiding distortion of price signals and ensuring open, competitive markets that provide a level playing field. ESC applies the underlying principle that the policy framework must be evolved to strengthen the role of markets, nurturing development of the wholesale, retail and financial markets in a way that drives innovation and delivers the best outcomes for consumers. We have developed a broad set of proposals to a new phase of electricity market reforms that focus on improving price signals and adopting outcome-based policy mechanisms to replace the current reliance on centralised contracting mechanisms to deliver decarbonisation and reliability outcomes. We would like to deepen our analysis, particularly of approaches to transitional design and phasing of reforms, through market simulation modelling and quantitative analysis.