UK Law and Practice Contributed by: Tom Sprange KC, Andrea Stauber, Martina Antosova and Lucy Pearson, King & Spalding International LLP
electricity transmission operators programme for net zero reform and to the Review of Elec- tricity Market Arrangements (REMA) process. AFRY found moving to locational pricing in the UK electricity market would be “high risk for little reward”. However, there are others, such as Octopus Energy’s CEO, who have called for locational pricing in order to make bills cheaper and give areas of the UK with plenty of renew- able generation some of the cheapest electricity in Europe. It has been recently reported that technology companies who are high-load consumers of electricity through their operation of data centres are advocating for the introduction of locational pricing in the UK. This is because it would likely lead to areas such as Scotland offering cheap electricity prices because of an abundance of windfarms and low population density, making them hotspots for data centres. However, in July 2025, Ed Miliband said that the UK would not introduce locational pricing. 1.8 Unique Aspects of the Power Industry The UK benefits from a geographical advantage in respect of long coastline, shallow water and consistent strong winds, meaning that it is one of the world’s leaders in both offshore and onshore wind power. Further, the UK has often led the way in terms of innovation in energy technology and related markets. Among its other contributions, the UK was: • the first to build a coal-fired power station (the Edison Electric Light Station was built in London in 1882);
• the first to build a full-scale nuclear power station in the Western world; and • the first major economy to put into law that it would reach net zero carbon emissions by 2050. 2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market Great Britain currently uses national pricing. However, as mentioned in 1.7 Announcements Regarding New Policies , the Energy Secretary has recently been evaluating the benefits of a locational pricing model. In 2005, the British Electricity Transmission and Trading Arrangements (BETTA) introduced a GB-wide electricity market, setting one price for electricity in each trading period. The following wholesale markets operate within BETTA to allow electricity market participants to buy and sell power. • Forwards and futures market – contracts between generators and supply companies for the delivery of electricity are entered into from between several years to 24 hours in advance. These markets allow generators and suppliers to enter into contracts for the purchase of electricity at an agreed price on an agreed date. The majority of electricity trading in Great Britain takes place in either the forwards market or the futures market. • Short-term market (also known as the “spot market”) – this market operates two days ahead of the relevant half-hour settlement period. This means that contracts for elec- tricity can be bought between 48 hours prior
285 CHAMBERS.COM
Powered by FlippingBook