What’s next after no zonal? Key takeaways from the latest REMA update

Today (10 July), the UK government announced its long-awaited decision to retain a single national GB-wide wholesale market price and move away from plans to implement zonal pricing. Alongside the announcement, government published a REMA Summer 2025 update. This follows on from a REMA Autumn 2024 update and the responses to the second REMA consultation in March 2024. 

This article pulls out key points from the REMA Summer 2025 update, including what options remain on the table for a reformed national pricing package and what’s next for the REMA programme. 

Heavy lifting by the SSEP

The Strategic Spatial Energy Plan (SSEP) expected to be published in late 2026 is the ‘centrepiece of reformed national pricing’. As a recap, the SSEP will be a GB-wide plan that will map the optimal locations, quantities and types of energy infrastructure for electricity, hydrogen generation and storage. The first SSEP will also optimise a small volume of flexible data centre demand (1-2GW). This will build on the strategic planning signals of the Clean Power 2030 Action Plan.

The outputs of SSEP will feed into the Centralised Strategic Network Plan (CSNP), a 25-year plan for transmission network infrastructure investments and reinforcements. The CSNP plan should be published in late 2027. Government anticipates that alongside network build through the CSNP, SSEP will be driven and implemented through levers such as planning reform, seabed leasing, connection reform and network charging reform.

Longer term TNUoS reform

The government has committed to reforming Transmission Network Use of System charges (TNUoS) and connection charging regimes for generation and demand so these locational signals are more predictable for investor certainty and ensure ‘the cost of network construction and constraints are factored into the siting decisions made for new generation’.

The government aims to deliver TNUoS reform as soon as possible within the current Parliament and by 2029 at the latest. A delivery plan will follow later this year and reforms will be implemented through primary legislation, likely conferring time-limited powers to Ofgem and DESNZ to amend codes and licences. Ofgem will publish an open letter shortly to initiate a TNUoS review which will include a review of TNUoS objectives, changes to ensure compatibility with SSEP and CSNP, updates to cost drivers in methodology, changes to increase predictability, deepening connection charges and a review of charges for storage and demand. 

Balancing Mechanism now in the spotlight 

The Summer 2025 update emphasises the need to improve operational efficiency of the electricity system, with the key tool being the Balancing Mechanism (BM). NESO and Ofgem have identified the following measures as areas of potential reform:

• Shortening the imbalance settlement period to 15 or 5 minutes: this would be positive news for flexible assets such as battery storage and demand-side response providers, and was still on the table following the second REMA consultation response.
• Lowering the mandatory BM participation threshold: allowing smaller assets such as small-scale batteries to participate in the BM. NESO and Elexon have been moving in this direction but barriers to entry still remain. 
• Alignment of market trading deadline with gate closure: bringing the market trading deadline back in line with gate closure (both deadlines used to be the same until a 2017 rule change). The mismatch currently creates uncertainty for NESO in keeping the grid balanced in real-time.
• Physical Notifications (PNs): requiring PNs to match generators’ traded positions to provide NESO with a more reliable picture of supply and demand.
• Unit-level bidding: to support a more level-playing field between small and large market participants and allow for enhanced market power mitigation in relation to constraints, though the update notes that further evidence is needed for this measure. 

The update also confirms that along with zonal pricing, government will also discount dual-imbalance pricing and a quasi-pay-as-clear BM.  

Constraint management measures and improving interconnector flows

DESNZ are currently working with NESO to deliver constraint management measures through the Constraints Collaboration Project. Phase two has recently finished, with leading options including long-term contracts to incentivise new demand to site behind constraints (including data centres) and technical measures to increase electricity flow over network boundaries. 

Interconnector flows also feature in the update with a commitment from government to continue to work with NESO to improve interconnector flows, including system-to-system operator trading and counter trading. 

Some certainty for the next CfD round 

Timing wise, the update from government has been made in part to give certainty to potential CfD Allocation Round 7 (AR7) bidders this summer. In the update, government confirms that there will be no legacy or transitional arrangements for reformed national pricing ahead of AR7. Bidders will still however be awaiting the final government response on CfD reforms, including on whether the current 15 year contract term will be increased as well as Ofgem’s decision on CMP444, introducing a temporary cap and floor mechanism to wider TNUoS charges. 

What’s next? 

• A ‘Reformed National Pricing Delivery Plan’ setting out next steps on design and delivery will be published later this year.
• The final REMA programme analysis will also be published later this year, including a full cost benefit analysis of the different wholesale market options.
• As mentioned above, the SSEP will follow at the end of 2026. Government has also committed to working with Ofgem to drive forward TNUoS reform (delivered by 2029 at the latest) with an Ofgem letter due shortly to initiate a TNUoS review.
• NESO to launch a consultation on balancing reform later this year, with NESO and DESNZ to also complete the Constraints Collaboration Project.
• A consultation on proposals to make changes to the Capacity Market will also be published later this year.