Network charging, in tandem with market design, must urgently reflect the physical realities of the electricity system by delivering transparent, cost-reflective signals that vary by time and location to guide efficient investment and operations. Given the government’s decision not to pursue nodal or zonal pricing under the Review of Electricity Market Arrangements (REMA), there is greater onus on Ofgem ensure accurate signals and long-term clarity, to avoid the risks of centralised misallocation and enable a level playing field for all technologies to drive a fair, secure, and efficient Net Zero transition.

Key points:

• Urgent reform needed – Network charging must reflect the real-time and locational value of electricity to guide efficient investment and operation.
• Increased role for Ofgem – With government rejecting nodal/zonal pricing under REMA, Ofgem must deliver accurate, cost-reflective signals and long-term clarity to avoid misallocation and ensure fairness.
• Risks of delay – Waiting until 2029 for enduring reforms could lock in inefficient investments and raise consumer costs.
• Avoid over-centralisation – Over-reliance on central planning risks misallocating capital; decentralised market actors should respond to accurate price signals instead.
• Level playing field – Reforms should ensure all technologies compete based on their true system value, supporting a fair, secure, and efficient Net Zero transition.