Design Options for Nodal Pricing in GB

Concepts

• energy related
• ofgem
• nodal pricing
• technical assessment of nodal pricing
• locational marginal pricing
• design options
• form of market design
• potential of locational marginal pricing
• future market design
• overarching assessment of the value of nodal pricing

Location

London

Description

This procurement is for a party to support and work alongside Ofgem in delivering a technical assessment of nodal pricing for GB. Ofgem is keen to investigate further the potential of nodal pricing in enabling a cost-effective, secure pathway to Net Zero for the whole energy system. Greater locational and temporal market signals have the potential to drive more efficient use of system assets and lower total system costs by: * incentivising optimal demand and supply responses (in the right place at the right time); * stimulating innovation in storage and demand response in the places it is needed; and * supporting competition between demand/storage solutions and new network capacity.

Total Quantity or Scope

Nodal pricing (also known as locational marginal pricing/LMP) is a form of market design used in more than 10 jurisdictions in various forms and is often considered best practice amongst electricity market designers worldwide. Nodal pricing for GB has gained traction in recent years. A 2015 CMA investigation into the potential of locational marginal pricing in GB estimated potential benefits of up to 70 million GBP per year in England and Wales alone. In 2020, Aurora produced a report for the Policy Exchange estimating average system savings from nodal pricing to be 2.1bn GBP per year across GB in the period 2025 - 2050. More recently, the Energy Systems Catapult (Oct 2021) concluded nodal pricing is the “first best approach to signalling locational value in a more deeply decarbonised, decentralised, and digitised electricity system”. … Nodal pricing would, however, represent major and complex reform to the GB electricity market. To inform Ofgem’s position on future market design, Ofgem is keen to develop a robust understanding of: * The technical models for LMP in GB * The associated costs, benefits, and distributional impacts of said models * The implementation requirements for a preferred model. This will require an overarching assessment of the value of nodal pricing to GB consumers and in achieving the UK’s decarbonisation targets, with this to be modelled as part of this project. "See attached 2021-153 Design Options for Nodal Pricing in GB ITT document for further detail"

Renewal Options

optional 2 months extension at the Authority’s discretion

Award Criteria

CPV Codes

• 71314000 - Energy and related services
• 09310000 - Electricity
• 71314300 - Energy-efficiency consultancy services

Indicators

• This is a one-off contract (no recurrence)
• Renewals are available.
• Staff qualifications are relevant.

Other Information

** PREVIEW NOTICE, please check Find a Tender for full details. ** Please see the ITT document for further information. NOTE: To register your interest in this notice and obtain any additional information please visit the myTenders Web Site at https://www.mytenders.co.uk/authority/notice_UnpubView.aspx?ID=224687. The buyer has indicated that it will accept electronic responses to this notice via the Postbox facility. A user guide is available at https://www.mytenders.co.uk/sitehelp/help_guides.aspx. Suppliers are advised to allow adequate time for uploading documents and to dispatch the electronic response well in advance of the closing time to avoid any last minute problems. (MT Ref:224867) NOTE: To register your interest in this notice and obtain any additional information please visit the myTenders Web Site at https://www.mytenders.co.uk/Search/Search_Switch.aspx?ID=224687. The buyer has indicated that it will accept electronic responses to this notice via the Postbox facility. A user guide is available at https://www.mytenders.co.uk/sitehelp/help_guides.aspx. Suppliers are advised to allow adequate time for uploading documents and to dispatch the electronic response well in advance of the closing time to avoid any last minute problems. (MT Ref:224687)