REMA 2025 summer update: Key reforms FAQs

What is REMA and what has happened so far?

The Review of the Electricity Market Arrangements (REMA) is a long running policy and regulatory reform package. Its aim is to improve the compatibility of the energy market with an evolving and increasingly decarbonised system.

The Government launched REMA as part of its British Energy Security Strategy in April 2022. The intent was to ensure the market arrangements were complementary to achieving the country’s Net Zero ambitions while reflecting the changing energy mix and market dynamics.

What is in scope for REMA?

The scope of REMA includes parts of the energy system that are designed to facilitate the supply and demand of electricity, including the:

• Market design, with the key question being whether we stick with a national market or move to a smaller nodal or zonal market,
• Contracts for Difference (CfD) scheme,
• Balancing Mechanism (BM),
• Ancillary services,
• Capacity Market (CM)

How has REMA evolved?

What was the outcome of zonal pricing vs a reformed national model?

In its summer REMA update, DESNZ confirmed it wouldn’t go ahead with zonal pricing reforms to the wholesale electricity market and would instead retain a single GB-wide wholesale market. It also announced the introduction of an “ambitious package of reform to improve the efficiency of our future power system.”

The Government believes it can solve the current misalignment between generation-siting and transmission-build (which causes higher constraint and balancing costs), without moving to a more disruptive zonal pricing model. It said the decision would provide certainty for investors, fairness for customers, and lower costs by reducing the risk of investing.

DESNZ announced three key parts of the reformed national pricing package:

• Strategic Spatial Energy Plan
• Transmission network and connection charges
• Improving the operational efficiency of the power system

How will the market change under a reformed national pricing model?

Strategic Spatial Energy Plan (SSEP)

Around the end of next year (2026), NESO will publish the Strategic Spatial Energy Plan (SSEP) which will be the centrepiece of the reforms. The SSEP will spatially map out (and establish a long-term view of) the energy assets needed to meet net zero goals by 2050. It’ll be key to determining the mix and location of generation and storage assets, and will be implemented through various levers, including; planning reform, seabed leasing (for offshore projects), network build (through the Centralised Strategic Network Plan, CSNP), reforms to the connections regime, and reforms to network charging.

Transmission charges

The Government plans to reform Transmission Network Use of System (TNUoS) charging to support the delivery of the SSEP. It wants the reform to reflect the long-term system benefits of new generation siting decisions, factoring in the cost of network construction, reinforcement and constraints.

Currently, TNUoS cost volatility has an impact on investors and can also drive extra costs for consumers. The Government hopes to improve this by refining the predictability of charges and giving clear signals about the optimum location(s) of new investment into the energy system.

TNUoS reform: key steps

• DESNZ and Ofgem plan to deliver TNUoS reform as soon as possible, and by 2029 at the latest.
• Primary legislation will give powers for both Ofgem and the Secretary of State (if required) to amend the necessary codes and licences to enable the reforms.
• Ofgem will lead on the development once the Government has outlined its Reformed National Pricing Delivery Plan in the autumn.

Improving the efficiency of the power system

As well as its measures to ensure new assets are sited in the most efficient locations, DESNZ also announced measures related to operational efficiency. These include improvements to balancing and settlement arrangements, as well as to constraint management.

NESO and Ofgem have identified the following potential areas for reform:

• Reforms to the BM including lowering the BM participation threshold and shortening the imbalance settlement period (SP) from the current 30 minutes to 5 or 15 mins.
• Improving interconnector flows between UK and Europe.
• Constraint management measures to reduce the impact on consumers of constraint costs (the Constraints Collaboration Project aims to reduce these impacts).
• Wider measures to ensure system operability is maintained.

How could REMA impact businesses?

In its summer update, the Government stated that a reformed national pricing model could lower consumer bills through a market that creates a more attractive environment for investing. It also suggested that the decision to keep uniform wholesale market pricing was fairer for consumers compared to locational wholesale pricing.

The Government also stated that proposed network reforms, focussed on efficient placement of new assets on the network, would reduce infrastructure build costs to consumers.

For consumers with the ability to provide flexibility to the market, reforms to the balancing mechanism could make it easier for smaller assets to participate.

For those in the Corporate Power Purchase Agreement (CPPA) market or looking to enter it, the Government plans to deliver a call for evidence on how to further develop the (CPPA) market.

What are the next steps?

• As published in September 2025, although Ofgem may parallel track work in advance of the Government publishing its Delivery Plan.

What remains undecided at present?

Remaining decisions for REMA

While this summer update provides certainty on the zonal vs national prices debate, decisions around efficiency improvements for the BM remain on the table.

Alongside the reforms, the Government said it will continue to support large users of electricity – such as data centres – by developing the power infrastructure they need. Additionally, DESNZ and the Department for Business and Trade will deliver a call for evidence on how to further develop the Corporate Power Purchase Agreement (CPPA) market “in due course”.

The Constraints Collaboration Project will be one of the primary means to reduce the impacts of constraints and their costs to consumers. Meanwhile, the Government will continue to explore closer collaboration with the EU on energy.

What should I look out for going forward?

Although the Government’s summer update has provided some clarity on a direction for the market, a lot of the detail is yet to be ironed out. It will be important for businesses to stay up to date with developments. We will publish further information as and when announcements are made.

Things that you can do:

• Make a note of when key announcements could be published
• Read analysis when it is released
• Get in contact if you have any questions

Disclaimer

We’ve used all reasonable efforts to ensure that the content in this article is accurate, current, and complete at the date of publication. However, we make no express or implied representations or warranties regarding its accuracy, currency or completeness. We cannot accept any responsibility (to the extent permitted by law) for any loss arising directly or indirectly from the use of any content in this article, or any action taken in relying upon it.