Before it reaches the consumer the vast majority of the gas and electricity that is consumed in GB must pass through a number of stages in the energy supply chain. The wholesale markets are where gas and power are bought and sold by several different types of participants.
Companies that produce or import energy, such as electricity generators and gas producers, sell their energy in the wholesale markets.
Companies that consume energy, such as large industrial companies or who have customers that consume energy (eg retail suppliers), buy the energy they need in the wholesale markets.
We consider the overarching objective of gas and electricity wholesale markets is to provide a dynamic and sustainable mechanism in which informed participants can confidently and efficiently buy and sell the energy they need at a price that reflects economic costs.
To achieve this, we monitor the market against a framework of four high-level features:
- Security of supply – critical for consumers, the economy and wider society.
- Access and liquidity – makes it easy for market participants to trade and facilitates competition.
- Competition – drives innovation and puts downward pressure on prices to ensure they are as low as possible.
- Investment and sustainability – ensures there are adequate, clean supplies of energy for current and future consumers.
Assessed together, this framework gives a broad view of how effectively the market is functioning.