While there may be consensus on the need to build a broad range of power stations the government is considering whether to change the way the energy market operates. Broadly speaking, electricity companies in Great Britain buy and sell power in a number of decentralised markets, with the transmission system operators intervening only as far as is necessary to ensure that the power can actually be delivered. I would argue that this system is unlikely to deal efficiently with large numbers of wind power stations with intermittent output, many of them far from most consumers. Instead, we should adopt the market design already successfully used in the North-Eastern United States for ten years, which has an (optional) centralised market, prices for electricity that reflect the generator’s location, and a market for spare capacity that can fill in when other stations are unavailable.
Professor Richard Green
Director of the Institute for Energy Research and Policy