Clean Power 2030: REMA Update – GB Zonal Pricing Rejected

The UK Government published its long-awaited Review of Electricity Market Arrangements (REMA): REMA Summer Update (the Summer Update) on 10 July 2025. In it, the Government rejected proposals to introduce zonal pricing and decided to retain the existing single national GB-wide electricity wholesale market, alongside making reforms to improve the power system's efficiency.

The REMA programme commenced under the previous government in April 2022, considering a wide range of proposals to ensure Great Britain's (GB)future decarbonised power system is efficient and cost-effective. See our previous article here for more details on the REMA programme.

In the Summer Update, the Government has taken the most significant decision in the REMA programme to date by concluding that it will not split GB's electricity wholesale market into multiple zones, in which different electricity prices could apply. The Government concluded that a zonal pricing model would have:

1. significant risks in respect of the degree to which it would create stable long term locational investment signals for new generation (given the protections expected to be available to CfD-holders);
2. a risk that fair outcomes for consumers would not be achieved due to the distributional challenges presented and mitigation measures required;
3. additional risk and uncertainty for investors, increasing the cost of delivery, at a time when unprecedented levels of investment in the energy system are being called for under the Government's Clean Power 2030 Action Plan; and
4. significant delivery challenges and risk due to zonal pricing's complexity, requiring substantial changes across industry and at least seven years to implement.

The Government instead plans to provide more transparent and predictable locational signals as to where electricity generation should be located and better operational efficiency through a reformed national pricing model, including:

• Strategic Spatial Energy Plan (SSEP) – this GB-wide spatial energy plan for large-scale electricity and hydrogen generation and storage will forecast energy supply and demand characteristics and map potential zonal locations, quantities and types of generation and storage. The SSEP will also seek to ensure that high power demand users, such as data centres, are located where they will deliver the best outcomes for the electricity system. The first iteration of the SSEP is due to be published by NESO in 2026 and is to be "at the heart of the reforms" through its implementation via planning reforms, seabed leasing, the Centralised Strategic Network Plan (CSNP), connections reform (see our article here) and network reforms. See our previous article on strategic plans here for more detail.
• Transmission charges – the Government will work with Ofgem to review Transmission Network Use of System (TNUoS) charges and connection charges for both generation and demand to provide stronger incentives to build generation where it is needed and make charges more predictable. The review is expected to include aligning TNUoS charges with the SSEP and CSNP, increasing TNUoS predictability, deepening connection charges and reviewing charges for storage and demand. The Summer Update confirms that reforms to TNUoS charges will align to the Government's Industrial Strategy growth sectors.
• Improving operational efficiency – a package of improvements to NESO's ability to balance the system has been identified for potential reform, including lower mandatory Balancing Mechanism participation threshold (allowing smaller assets, such as batteries, to participate, making better use of flexible embedded generation in balancing); alignment of the market trading deadline with gate closure and alignment of physical notifications with traded positions (to give NESO a better understanding of what each asset actually plans to generate); and unit-level bidding (to allow for greater transparency and mitigation). The Government, NESO and Ofgem are also still considering shortening the imbalance settlement period from the current 30 minutes to 5 or 15 minutes to create more granular signals and enable participation of smaller very responsive flexible assets, such as demand-side response and batteries.
• Constraints management – the Government will continue working at pace to upgrade transmission infrastructure and is supporting NESO to conclude its Constraints Collaboration Project. Key options include long-term contracts to incentivise new demand to locate behind constraints (e.g. data centre demand) and technical measures to increase electricity flow over network boundaries. NESO will also look at further options to reduce constraints.
• Improving interconnector flows – the Government will explore participation in European electricity trading platforms as agreed under the Common Understanding between the UK and the EU and will continue to work with NESO to ensure its existing tools to manage interconnector flows are effective.
• Wider operability measures – the government and NESO are developing measures such as a 2030 operability strategy and forecasting future operability needs to allow for better investment decisions on the need for ancillary services.

A dual imbalance price and a quasi pay-as-clear balancing mechanism, which were previously put forward as options to reform balancing and settlement arrangements, have now been discounted.

Next steps:

• Timing unclear – completion of NESO Constraints Collaboration Project.
• Timing unclear – call for evidence to explore how the Corporate Power Purchase Agreement market can be further developed.
• Q3 2025 – Ofgem open letter initiating TNUoS review.
• By end of 2025 - Reformed National Pricing Delivery Plan to be published, setting out the next steps on design and delivery and further detail on the primary legislation required for implementation.
• By the end of 2025 - final REMA analysis to be published, with a full cost benefit analysis of the wholesale market reform options.
• By the end of 2025 – NESO consultation on balancing reform.
• By the end of 2025 – detailed delivery plan setting out how the Government and Ofgem will deliver TNUoS and connection charges reform.
• By the end of 2025 – consultation on proposals for changes to the Capacity Market.
• By the end of 2026 – SSEP to be delivered.
• By the end of 2029 (earlier if possible) – TNUoS reform to be delivered, including primary legislation to amend the necessary codes and licences.

The Summer Update focuses on the high-level decision on wholesale market reform to provide much-needed clarity ahead of the launch of CfD allocation round 7 (expected in August 2025). For detail on the design of the reformed national pricing model, stakeholders will need to analyse the Reformed National Pricing Delivery Plan and other consultation documents once they are published later this year.

The Summer Update also does not give final decisions on some of the other options being considered as part of the wider REMA programme. Whilst a consultation on Capacity Market reforms is proposed by the end of 2025, the Summer Update is silent on the status of the CfD reform options considered earlier in the REMA programme (including a capacity-based CfD, deemed CfD, partial CfD and reference price reforms). As has been the case with the REMA programme so far, investors will need to continue to wait for final decisions and details to understand the full impact of REMA.

The Government will be holding further engagement opportunities on REMA starting the week commencing 14 July 2025. All confirmed engagement plans will be shared via the mailbox: REMAMailbox@Energysecurity.gov.uk.