Charging ahead: The next phase of Electricity Market Reform

If you work in the renewable energy industry, chances are Reformed National Pricing (RNP) will affect your work in one way or another. Whether you’re developing projects, navigating the planning system or assessing the role of energy storage in managing constraints, the reforms now being developed under the RNP banner will help shape the future investment environment for clean energy projects.

In a nutshell, RNP is a UK Government initiative that aims to make the electricity market more efficient and affordable while maintaining a single national wholesale electricity price.

But despite the new name, RNP is far from a new policy initiative.

 

Why do we need reform?

The UK’s electricity market was designed in 1990 for an energy system that has changed significantly in the 36 years since it was introduced. Historically, power generation was concentrated in a relatively small number of large thermal power stations located close to where it was needed most. Today’s system looks very different.

As clean energy generation has grown rapidly across the UK, the challenges facing the electricity system have evolved. Network constraints, increased balancing costs, a lengthy connections queue and questions about how best to incentivise investment have all become more prominent.

The challenge facing policymakers is clear, how do we adapt the market framework so that it works effectively for a power system dominated by low-carbon generation?

 

So how did we get here?

In 2022, the UK Government committed to undertake a comprehensive review of the electricity market. This resulted in the launch of the Review of Electricity Market Arrangements (REMA), a wide-ranging programme examining whether existing market arrangements remained fit for purpose as the country moved towards a decarbonised power system.

Between 2022 and 2025, the UK Government published two REMA consultations and two subsequent update documents. Across these publications, a broad range of reforms were considered, spanning wholesale market arrangements, network charging and investment signals.

One proposal came to dominate much of the debate, Locational Marginal Pricing (LMP), more commonly referred to as zonal pricing. Industry discussion frequently centred on whether introducing regional wholesale electricity prices would encourage industry to build and operate assets in ways that make better use of the electricity network

However, in its 2025 REMA Summer Update, the UK Government ruled out zonal pricing and instead confirmed that it would retain the existing national wholesale market structure. At the same time, it launched a new programme of work: RNP.

 

Where are we going?

Since confirming its plan to retain and reform the national market, the UK Government has started setting out how it intends to deliver that vision.

The recently published RNP Delivery Plan provides a clear indication of the planned direction of travel. The document outlines both a programme of reform and a framework for further development across several areas.

Taken together, these reforms represent an attempt to address many of the challenges that have emerged while the deployment of renewable energy infrastructure has accelerated. But delivering meaningful reform will require more than a collection of individual policy initiatives.

Creating a market framework that works for a low-carbon electricity system requires close coordination between government, regulators, industry and system operators.

The UK Government, Ofgem and NESO are all progressing consultations and call for inputs that touch on many of the same issues. While this activity reflects the scale of change under way, it also creates a challenge for industry participants trying to engage with the process. The success of RNP will depend not only on the quality of individual reforms, but also on how well they fit together.

As the RNP programme moves from design to delivery, our industry is looking for greater coordination, clearer sequencing and a shared vision across all three institutions.

The destination is clear, an electricity market designed for a low carbon future. The challenge now is ensuring that the various strands of reform come together to create a coherent framework that gives investors, developers and consumers confidence that the UK’s modern electricity market will deliver a more resilient and cost-effective energy system.

By Poppy Bottomley, Economics & Markets Policy Manager at Scottish Renewables