The UK Power Market Has Never Been More Complex - Or More Exposed to Getting It Wrong

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Electricity prices in Great Britain have been the most volatile in Europe over the past three years. Day-ahead prices have ranged from negative values during periods of high renewable output and low demand to £3,000/MWh during system stress events. Balancing Mechanism actions are increasingly frequent and increasingly expensive. Non-commodity costs — network charges, BSUoS, capacity market levies, renewables obligation — now represent between 40% and 60% of the total electricity bill for an industrial consumer, and their trajectory is uncertain as REMA, zonal pricing, and Ofgem's network charging reviews run in parallel.

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For a renewable or flexible asset, the commercial strategy around power trading and revenue de-risking is not a treasury function to be added at the end of development. It is a core value driver — and, if designed poorly, a core value destroyer.

 

The Revenue Risk Is Real and Current

Consider what has changed in the past twenty-four months for assets in the UK market:

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• PPA markets have repriced. The collapse of wholesale electricity prices from post-crisis highs has compressed fixed-price PPA offers for solar and wind. Developers who locked in long-term PPAs during 2022–2023 at or near peak rates are sitting on significant value. Those seeking PPAs now face a market where offtakers — utilities, corporates, traders — are less willing to take long-term price risk, and the available products have shorter tenors, higher floors, and more restrictive curtailment clauses.

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• The Balancing Mechanism has become a primary revenue source for BESS. BM revenues now account for approximately 50% of the typical BESS revenue stack, up from under 8% in 2022. The implications for optimisation strategy, dispatch logic, and operational infrastructure are material — and not all asset owners have adapted.

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• REMA is rewriting the incentive structure for location. The Review of Electricity Market Arrangements is examining whether Great Britain should move from national to zonal electricity pricing. Under a zonal model, assets in areas of network congestion — parts of Scotland, East Anglia, the South West — face materially different wholesale price exposure than those in the South East. Residual Network Pricing (RNP) proposals under the Transmission Network Use of System (TNUoS) review create further locational revenue uncertainty. An asset developed without modelling zonal pricing scenarios is carrying latent value risk.

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• Non-commodity costs are rising and unpredictable. Capacity market levy, network charges, BSUoS — collectively representing a growing share of the total merchant exposure for co-located and behind-the-meter assets. Understanding the interaction between energy revenue and total cost of supply is essential for accurate project economics.

 

What CM Energy Insight Delivers

Commodity advisory is most valuable when it bridges the commercial and technical — when the person advising on the revenue structure also understands the engineering constraints of the asset, the market mechanics of the instruments being used, and the financial structure that the project is trying to satisfy.

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The core service areas are:

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• PPA design and negotiation — structuring the heads of terms, selecting the right contract type (fixed, floor, baseload, shape-adjusted, proxy generation), and negotiating the commercial terms that actually matter: curtailment, balancing, imbalance risk allocation, and change-of-law.

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• Route-to-market strategy — evaluating licensed supplier, sleeved PPA, direct wire, trading optimiser, and merchant routes; building the commercial case for each option relative to the asset's technical profile.

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• Revenue stack analysis and optimisation — constructing the forward-looking revenue model across capacity market, ancillary services, BM, wholesale arbitrage, and flexibility products; stress-testing it against current market assumptions rather than historical proxies.

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• Hedging strategy and counterparty selection — for assets with merchant price exposure, designing a hedging programme that reflects the asset's cash flow requirements, lender covenants, and market liquidity constraints.

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• REMA and zonal pricing preparedness — scenario analysis of the asset's commercial exposure under the various REMA options currently under consultation, informing development and investment decisions before the policy is finalised.

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• Commodity analytics and forecasting — independent market analysis to support investment committee presentations, lender reports, and management decision-making.

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The Boutique Advantage in Trading Advisory

Large advisory firms model commodity markets in teams. A junior analyst updates the price curve; a senior partner presents it to the board. The nuance between those two moments — the commercial judgement about what the numbers mean for this specific asset, in this specific market, at this specific moment — is where value is made or lost.

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CM Energy Insight's commodity advisory is delivered directly by a practitioner with direct origination, trading, and structuring experience across gas, power, and renewable assets. That experience is not abstracted into a methodology deck. It is applied to your commercial problem.

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Energy market volatility is not going away. The question is whether it works for your asset or against it. Talk to CM Energy Insight about structuring your commercial position.