Elexon has warned electricity market reforms must reflect a decentralised grid or risk locking in higher costs, as the system shifts towards renewables and flexibility.
The organisation says Reformed National Pricing needs a whole system approach built on better data coordination and forecasting rather than a continued focus on the transmission network.
With distribution connected generation rising from 15% in 2011 to around 36% today the structure of the system has already changed.
Rising redispatch costs driven by network congestion, limited visibility of distributed assets and weak alignment between wholesale markets and real time system needs, are all pushing up costs and complexity.
Elexon argues reforms should improve price signals and system efficiency while keeping a single national wholesale price but with a clearer reflection of when and where electricity is needed.
Without that there is a risk of distorted signals leading to poor investment decisions and inefficient outcomes.
Peter Stanley chief executive of Elexon said: “Reformed national pricing must reflect the reality of a decentralised energy system… a whole system approach will be critical.”
He added: “We must deliver changes that better reflect the true cost of producing and delivering electricity in different locations and times.”
The group is also cautioning against adding complexity for smaller assets particularly those connected at distribution level.
Lowering participation thresholds in balancing markets could create unintended impacts unless matched with better coordination between the system operator and distribution networks.
Instead the focus should be on improving data sharing strengthening links between system operators and unlocking flexibility through smarter use of existing data.
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