As part of the government’s Review of Electricity Market Arrangements (REMA), DESNZ is considering a suite of potential reforms, including a change from self-dispatch to central dispatch.

This would be a major change to the way electricity is traded in GB. Currently, until around an hour before it is due to be delivered, electricity is traded bilaterally between generators, retailers and other participants. From the day ahead stage, the reform being considered would see a greater role for a centralised algorithm in determining which power stations are planned to produce electricity, whether batteries and other storage sites are charged or discharged, and which aspects of demand side flexibility are used. In some ways, this would be a case of “back to the future”, as the current arrangements are the result of a reform which moved away from such an algorithm in the early 2000s.

In its REMA consultation, DESNZ outlines some of the potential benefits of central dispatch, but also recognises the material implementation challenges and risks. They are therefore clear about the need for confidence that the benefits more than outweigh the costs before deciding to make the change.  Centrica commissioned Frontier to assess central dispatch against the current arrangements. They asked us to examine the benefits that could arise from central dispatch and consider to what extent more evolutionary reforms could capture similar benefits.

We conclude that any assessment of overall benefits will, by its nature, be highly judgement based. This is in part because the benefits will depend on the efficiency of an algorithm that has yet to be designed and will need to evolve as the system changes. We also find that many of the potential benefits associated with central dispatch could be achieved at least to some extent through alternative and less fundamental reforms. As a result, we conclude that it will be difficult to be confident that the potential benefits of central dispatch are sufficiently strong to outweigh the implementation costs and risks highlighted by DESNZ. 

Click here to read the full report ''Assessing the Impacts of Implementing Central Dispatch in GB''