Emma Pinchbeck

Now, I'm explaining economics to you.

But the economic reason for that making sense, even if it doesn't intuitively, is it...

Prevents people from gaming the market.

The idea is they're all forced to bid in the most efficient price they can to try and get higher up the merit order.

And also that you're mostly procuring the cheap stuff in the stack and so you're getting, that is more cost effective overall.

So there are a few...

As you say, the older scheme.

So we've done the logic of it is it kind of from a security supply point of view across the whole system allows you to procure the stuff you need most cost effectively overall.

Do you believe that?

I think market design... There are like 10 people who are really nerdy about market design in the UK.

I have occasionally been one of them.

In this job, I should say, the Climate Change Committee doesn't work on policy design.

And the reason is it's because in every... And this is to a point, good or bad.

In every decision you make about the energy market and its structures and policies, there's normally a winner and a loser.

And that takes us quite into political territory that we can't be in.

So we'd agree with that bit in that our recommendation was move the levees so you get the cheap electricity signal through early and pre the 2030s when we're expecting it to come through the markets as older renewables projects roll off the contracts you're talking about on CFDs and elsewhere and the merit order starts to change.

In this period where the merit order, this is the thing where gas is still setting the price in that stack, that will change over time.

When I was spending a lot of time looking at market design, most of the alternatives have drawbacks as well.

So if you look at pay as bid or pay as clear auctions, which is different ways of doing the auction stack, you get competitive behaviours that are less competitive.

less good from a different kind of auction system because they're not incentivized to bid their literal costs in other systems where that's the case, they start to game the system.