Strengths and weaknesses of the British market model

David M Newbery

Chapter 6 in Handbook on Electricity Markets, 2021, pp 156-181 from Edward Elgar Publishing

Abstract: The state-owned CEGB was unbundled and privatised with a centrally dispatched pool and capacity payments in 1990, followed by massive gas entry under long-term contracts, undermined by retail competition from 1998. Although socially beneficial, flawed restructuring to a fossil duopoly raised concerns over market power, leading to reform in 2001 to a self-dispatched energy-only market.Confused policies caused impending capacity shortages, another market reform in 2011 that changed renewables support and introduced capacity auctions. Transmission pricing designed for central fossil generation proved unsuitable for decentralised generation, dramatically revealed in early capacity auctions. Fortunate conditions (spare capacity, cheap CCGTs) made the CEGB well-placed to benefit from private ownership and avoid many downside costs. Incentive regulation encouraged efficiency without damaging investment or quality, and, with lags, has responded to the challenges of decentralised renewables and capacity adequacy, but financing new nuclear has been costly and needs further reform.

Keywords: Economics and Finance; Environment; Law - Academic (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Strengths and Weaknesses of the British Market Model (2019)
Working Paper: Strengths and Weaknesses of the British Market Model (2019)
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