REMA Update: New direction for electricity market reform

The Review of Electricity Market Arrangements (REMA) Programme was announced by the Government in 2022 to identify reform for electricity market arrangements with the overarching objective of decarbonising and achieving a “fair, affordable and secure power system.”

On 10 July 2025, the Department for Energy Security and Net Zero (DESNZ) published an important REMA Update (Update), which endorsed a single national wholesale electricity market price (ruling out the possibility of zonal pricing, as previously highlighted here).

As part of this update, DESNZ outlined a “Reformed National Pricing Package” (RNPP), with more detailed information on this reform expected to follow.

Key features of the Reformed National Pricing Package

The overarching challenge which REMA has been considering is the misalignment between the location of generation and the availability of the transmission network, which has created inefficiencies, network constraints and increasing costs.

The RNPP is intended to address this by introducing reforms within the existing national pricing framework to result in a more strategic and cohesive energy system – primarily by signalling optimal locations for new generation and storage without wholesale market fragmentation.

Most importantly, the RNPP seeks to overlay a single GB-wide wholesale price with stronger strategic tools and market incentives to guide renewable energy development and investment in the transmission network. This includes planning tools, network charging and market reforms.

In doing so, the Government hopes to achieve an energy system that provides greater certainty and stability for investors, while being fairer and more affordable for consumers (who will continue to benefit from national pricing despite location-based generator incentives).

The key changes expected to be introduced can be broadly categorised as follows:

• Measures to facilitate the efficient siting of new assets. This includes:
  • a new Strategic Spatial Energy Plan (SSEP) and associated levers (including the Centralised Strategic Network Plan (CSNP); and
  • reform of transmission network and connection charges.
• Measures relating to operational efficiency. This includes:
  • improvements to constraint management; and
  • improvements to balancing and settlement arrangements.

Strategic Spatial Energy Plan

The main feature of the RNPP is the new SSEP, which is being led by NESO, and will involve system-wide coordination in generation, storage and network planning across GB. The overarching purpose of the SSEP will be to guide infrastructure development and underpin key decisions across the energy value chain.

The SSEP will do this by identifying optimal regions, quantities, types of generation and storage, and transmission infrastructure required across GB. The SSEP will in turn inform planning reform, seabed leasing, network build (via the CSNP), and network and connection-charging reforms.

NESO published their final SSEP methodology in May 2025 and the first SSEP is due in late 2026, with updates every three years thereafter.

Centralised Strategic Network Plan

The CSNP will be a 25-year transmission build-out plan, which will align network expansion with anticipated, longer-term needs based on signals from the SSEP. The CNSP is expected late 2027.

Transmission Network Use of System (TNUoS) and Connection Charges Reform

Ofgem will review and reform the TNUoS and connection charges, which play a key role in providing locational investment signals. The goal of this review is to achieve a more transparent charging regime which provides more predictable long-term signals that reflect grid constraints and where new investment should be located.

This is expected to enhance predictability and transparency for investors thereby resulting in more long-term investment.

Ofgem is expected to publish an open letter to initiate this review, and the full delivery of this reform is expected by 2029.

Operational efficiency measures:

The expected reforms also include a number of measures to enable NESO to undertake more efficient grid management and facilitate the better integration of flexible technologies. These include:

• Lowering the entry threshold for smaller assets (e.g., batteries) to participate in the Balancing Mechanism – this will result in more assets being available for NESO to call on when required.
• Aligning market trading deadlines with grid balancing timescales (i.e., “gate closure”) – this is expected to provide greater certainty to NESO and assist with keeping the grid balanced.
• Requiring physical notifications to match market positions for more accurate grid forecasting.
• Introducing unit-level bidding in the Balancing Mechanism to improve price accuracy.
• Shortening imbalance settlement periods (from 30 minutes to potentially 15 or 5 minutes), to sharpen price signals and incentivise technologies like batteries and demand-side response.
• Constraint management measures – DESNZ and NESO are continuing to pursue the Constraints Collaboration Package to find solutions to address network congestion. This may be via long-term contracts to incentivise new demand and technical interventions.
• Interconnector measures – the Update also highlights work on improving interconnector flows, including by exploring participation in EU trading platforms.

Next steps

The Update sets out a framework for upcoming reform, but much more information is needed as to the detail of each proposed measure and how such measure will be implemented in practice.

In the first instance, more detail is expected in the form of:

• A Reformed National Pricing Delivery Plan, which is expected to be published in late 2025. This will include a delivery timeline for implementing key activities forming the RNPP, an overview of legislation required to deliver such activities, and how the Government expects locational signals to improve clarity and predictability for developers and investors.
• Final REMA analysis (including a full cost – benefit assessment) – this is also expected in late 2025.
• Consultation on balancing and settlement reforms – this is likely to occur throughout 2025.
• Implementation of related code modifications and a capacity market update in 2025-2026.

As more detail comes to light, energy sector participants are encouraged to engage in consultations and consider how they might prepare for the expected changes.

Sharpe Pritchard advises project developers, investors, regulators and public authorities across the energy and infrastructure sectors. To see what we can do for you, please call 020 7405 4600 or email us on enquiries@sharpepritchard.co.uk.