RNP is the successor to REMA, the Review of Electricity Market Arrangements, a consultation that ran for three years from 2022-2025. REMA was looking at ways to reform the wholesale electricity market in GB. Initially there were various reforms on the table that were gradually narrowed down. One was locational pricing (a different price for electricity depending on where it was produced). This was controversial and eventually discounted last summer in the REMA July 2025 Summer Update.
The objective of RNP is “a market in which developers have the long-term certainty needed to invest in and maintain projects with high fixed costs and low running costs, and in which the costs to consumers – of generation, network, and system balancing – are minimised as far as possible.” [1]
Essentially this boils down to two issues:
- Where to put generation (and demand) projects – how to incentivise the market to put them in the optimal places
- How to operate the electricity system most efficiently
[1] RNP Delivery Plan, April 2026
Location: SSEP and siting and investment levers
Central to the reforms is the Strategic Spatial Energy Plan (SSEP). It’s a big change to how the GB energy system currently operates, where developers are free to choose any location for their energy project. The problem with that is, we have a lot of wind power in Scotland (where it’s windy) but not a lot of big power users in Scotland; they tend to be concentrated in the South-East of England. That’s a long way to transport energy and makes it more expensive.
So changes are afoot. We now have an independent, Government-owned National Energy System Operator (NESO) who have been tasked with producing an SSEP every 3 years that will set out where, what and how much power is needed in GB. The first SSEP is due in autumn next year (with a draft put out for consultation in early 2027) and will concentrate on electricity and hydrogen generation and storage. This is a big change from the current market-led approach to siting new energy developments.
But there is no point in having a plan if no one follows it. The RNP Delivery Plan proposes having “siting and investment levers” to encourage developers and investors to build new plants in the right areas. DESNZ are considering a range of options, with more or less weight given to the roles of grid connections and locational charges. The RNP introduces the concept of “Connection Capacity Thresholds”. A CCT is a limit set on the total volume (measured in MW or GW) of connection agreements that can be allocated for a particular technology (such as wind, solar, batteries, etc.) within a specific SSEP zone (a defined geographic area), over a given timeframe. The thresholds will be informed by the SSEP’s “CSNP planning line,” which sets out how much generation capacity is needed in each zone to deliver the government’s long-term energy objectives.
One option is to have a lower CCT with a minimal role for locational charges, so the CCT will be the main influence over where a developer sites their project, acting as a filter or cap on how many projects can be offered a connection agreement in a particular area. Another option is to have a higher connection capacity threshold to allow for competition for investment support schemes like CfD auctions and to account for project attrition, as not all projects with a connection agreement will ultimately be built. Under this option there could be a greater role for locational charges to influence where developers choose to connect.
Government investment support schemes could also be redesigned to nudge developers towards placing their projects where it’s best for the network, not just where it’s sunniest/windiest. The RNP Delivery Plan suggests there may need to be changes to the Contract for Difference (CfD) to incentivise projects in the right places (locational maxima).
There was a related Ofgem consultation on locational charges and regulatory siting levers: how the charges for using the transmission network (Transmission Network Use of System charges, or TNUoS for short) could be redesigned to better reflect where there is future network capacity. At this stage, there are a range of options that Ofgem was asking for views on. Existing projects and those with signed grid connection agreements, Contracts for Difference or Capacity Market agreements will have transitional arrangements so they won’t need to recalculate their investment decisions. This is important because TNUoS charges continue over the lifetime of a project, so could trigger the ‘change in law’ provisions in a contract if they change significantly. The RNP Delivery Plan states that the Government and Ofgem are committed to developing a fair and transparent approach to transitional arrangements (investment decisions taken before fully implementing RNP) and legacy arrangements (existing assets already on the system). They want to ensure that investors can have confidence in their decision-making and be assured that existing investments will be suitably protected against facing significant windfall gains or losses in the event of major reforms to the siting and investment levers.
Efficiency: Constraints Management and Balancing and Settlement Reform
The RNP Delivery Plan also looks at constraints management and balancing and settlement (BSM) reform, continuing the work started under REMA and a recent Call for Input from NESO.
Constraints are where there is not enough capacity on the network to transfer the amount of electricity needed. This results in generators in areas with surplus generation being paid to stop generating, or generators in areas closer to demand being paid to generate more. One solution to network constraints is building more cables to increase the network’s capacity, but this takes time. NESO is looking at other ways to manage constraints such as better incentivising energy storage; and encouraging data centres to be built in AI growth zones in Scotland, Cumbria and the North-East of England, where they can absorb excess renewable power.
BSM reform was a feature of REMA and is still being progressed under the NESO Call for Input. Reforms include lowering the threshold for mandatory participation in the Balancing Mechanism, meaning that smaller assets like small-scale batteries, would have to participate. A final decision on this will be made later this year, and a phased reduction could start in 2027. This will create more revenue opportunities for small-scale storage, as being in the balancing mechanism means they are paid to turn up/down as needed. But it will also mean more red tape and obligations, including for existing battery projects which would also be subject to these reforms.
When will these reforms happen?
It will be at least 2027 before any of these reforms start to take effect, but there will be more opportunities to feed into the reform process before then.
The Government is seeking new powers to modify codes and licences to deliver these reforms. It needs to pass new legislation for this, which is likely to be the Energy Independence Bill mentioned in King’s Speech. We will keep an eye out for this.
How will they impact my energy project?
Existing projects with a grid connection and a Contract for Difference or Capacity Market Agreement will not have those agreements changed as a result of these reforms, but they may see a change to their network charges (although there should be some form of transitional arrangements).
Projects that will not have secured a grid connection agreement or government support contract by the time the RNP reforms are implemented should assess how the reforms could affect them. This will depend on the technology (is it flexible in terms of output?), commercial arrangements (is there scope to change your contracts?), financing (does your financing depend on a certain level of cost/charges?), and location (could you move if you don’t align with the SSEP?) for example. Developers will want to see if there are any changes to associated regimes (for example in planning) to support the outcomes of the RNP reforms, so as to allow them to assess the impacts of the RNP reforms in full.
Projects that are located in the right place should benefit. Projects that can offer flexibility services (including batteries and data centres in the new AI zones) will have the opportunity to make more money from these. But projects that can’t choose where to locate may face higher connection and/or network charges.
The effect that the reforms will have on existing energy projects will be dependent on the shape of transitional arrangements – so one to for developers to keep a close watch on.
