REMA Update - NESO Call For Input On Reformed National Pricing Balancing, Settlement And Dispatch Reform In GB

The GB National Energy System Operator (NESO) has published a call for input in connection with the UK government's long-standing Review of Electricity Market Arrangements (REMA) programme, which seeks to reform the GB electricity market to deliver a more efficient and cost-effective, decarbonised, power system. Please see our previous articles here and here for more details of the REMA programme.

In its Summer Update in July 2025, DESNZ announced its decision to reject regional zonal pricing and to set up a reformed national pricing (RNP) model that gives more transparent and predictable locational signals. The Call for Input sets out NESO's proposals on balancing, settlement and dispatch reform to achieve improved system operability and efficiency, which is one of the RNP's aims, and forms part of the broader package of expected RNP changes.

NESO identifies the following key challenges in the current system:

Cost challenge from increasing redispatch

increased network congestion and misalignment between wholesale national price and locational balancing needs expected to require high levels of NESO balancing actions and costs

Insufficient visibility of and access to balancing resources

increasing levels of embedded generation are not visible and accessible to NESO for balancing in real-time

Overlap between wholesale market and balancing

the overlapping timeframe between Gate Closure and the market trading deadline results means that NESO do not have visibility over traded positions at Gate Closure, and can result in NESO taking counterproductive energy balancing actions. More flexible assets such as BESS and interconnectors may also respond to signals which do not reflect balancing needs such as network constraints.

Distorted wholesale price signals

higher levels of redispatch volumes and network congestion can increase the risk of strategic positioning against constraints, to benefit from the imbalance price. NESO's view is that Non-BM Units in particular have a greater ability to do this currently because they are not required to submit or follow Final Physical Notifications.

Building on the principles outlined in DESNZ's Summer Update, NESO explores the following reforms in its Call for Input:

1. Lower the mandatory balancing mechanism participation threshold

This would increase NESO's visibility of and access to balancing resources, by requiring smaller embedded generation to participate in the Balancing Mechanism. An initial assessment suggests a phased reduction of the threshold from 2027 to an ultimate 1MW threshold (e.g. earlier implementation for new connections and stepped threshold reductions over time). NESO will review the Balancing Mechanism requirements to ensure these are fit for purpose for smaller market participants, but acknowledges that this reform would result in additional operational and compliance costs for smaller market participants and may require a review of Capacity Market and CfD arrangements. TSO-DSO co-ordination will also need to be accelerated, to ensure that NESO's balancing actions do not inadvertently trigger constraints on distribution networks.

2. Align the market trading deadline and Gate Closure

NESO propose to realign the market trading deadline from the start of the Settlement Period (as is the case currently) to the Balancing Mechanism Gate Closure (which is currently one hour before the start of the Settlement Period), to give greater certainty on balancing actions required post-Gate Closure. This will effectively reverse the rule changes made in 2017. This reform is proposed to be implemented in 2027 - NESO acknowledge this may reduce near real-time market liquidity.

3. Final Physical Notifications to match traded position

Market participants will be required to match their market traded position with their Final Physical Notifications submitted to NESO, to prevent participants intentionally taking an imbalanced position at Gate Closure to benefit from exposure to the imbalance price. NESO are also considering increasing visibility of the aggregated trading position ahead of Gate Closure, through additional information sharing obligations. These reforms would provide NESO with a better forecast of the actual upcoming market position, to support more effective balancing decisions. This may particularly impact aggregated BMUs such as those managed by a Virtual Lead Party or Supplier BMUs where it may be more complex to accurately forecast. NESO's initial assessment suggests implementation of this reform starting in 2027.

4. Unit-level bidding

BM participants would be required to provide unit-level bids and offers in the day-ahead and intraday markets instead of on a portfolio-level basis. This would reduce the incentivisation to schedule units in a way that contributes to a network constraint and triggers redispatch action by NESO. NESO acknowledge this may have significant transition costs especially for market participants with diverse portfolios or that trade predominantly over the counter, and that this may have a higher impact on intermittent generation as volumes could no longer be allocated across a portfolio. NESO are considering two main options for this reform; physical unit bidding (under which the physical forward market is retained and portfolios are disaggregated at the day-ahead stage) and financial unit bidding (under which forward trading is converted to financial trading coupled with a new gross pool day-ahead market to gain a physical position). NESO says it will assess the timetable for implementation following the Call for Input.

5. Shorter settlement period

NESO propose reducing the settlement period length to 5 or 15 minutes, so that the imbalance price more accurately reflects the real-time value of energy and to provide better operational signals to fast-acting renewables and flexible resources. In the first phase of this reform, the change would only apply to the wholesale market although shorter profiling would be introduced to the retail market (i.e. domestic and small business consumers). This would require significant IT system and metering changes (including a review of CfD and Capacity Market arrangements), and mean that market participants would need to adapt their trading strategies to reflect potentially higher price volatility. NESO says it will assess the timetable for implementation following the Call for Input.

In respect of dispatch reform, NESO is exploring a range of dispatch reform options, with the aim of improving system operability and meeting the cost challenge of high levels of redispatch. NESO is looking at both the current self-dispatch model as well as a hybrid dispatch model under which the system operator can take balancing actions at an earlier stage. NESO will undertake further work on these reforms in 2026.

In terms of next steps for the REMA programme:

• Balancing, settlement and dispatch reform: the deadline for feedback to the Call for Input is 5pm on Tuesday 14 April 2026. Further NESO consultations and final recommendations are due later in 2026.
• DESNZ is expected to publish its RNP Delivery Plan shortly, which will set out a delivery timetable and implementation plan for the wider RNP package, including siting and investment levers and the constraint management action plan.
• Further plans and consultations on changes to the Capacity Market and to transmission and connection charging are due in 2026 (originally due in 2025).
• The first draft Strategic Spatial Energy Plan (SSEP) is now due by early 2027, with the final plan to be published in autumn 2027.

Investors and market participants will need to continue to assess the potential implications of REMA on their businesses, including impacts on contractual arrangements (particularly change in law clause triggers), trading strategies and portfolio management, and locational impacts for projects in development. Smaller market participants not currently participating in the Balancing Mechanism will need to be ready to comply with increased ongoing regulatory requirements associated with Balancing Mechanism registration. The options being considered by NESO could have a particularly significant impact on BESS and other dispatchable assets, with PPA and optimisation agreement terms needing to be reviewed so that any required changes can be made ahead of potential implementation of the reforms from 2027.

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