The UK’s electricity sector is in a process of profound transition, Energy UK has said.

As the UK needs to remove the sector’s remaining carbon emissions, it also needs to increase domestic power generation capacity to meet electricity demand that is set to increase by more than 50% by 2035.

Energy UK has published a report which sets the challenges and potential reforms of the sector.

The paper drawn up by the trade association, following close consultation with its members, presents a cross-industry overview of what the future power market must deliver – as well as possible reforms for further analysis.

The authors of the report state that the future power market must deliver a rapid expansion in generation capacity highlighting the role the Contracts for Difference and Capacity Market could play in supporting this goal.

Energy UK also calls for a framework that incentivises flexible technologies.

The UK’s future energy system should also look at reforming the wholesale market and improving its efficiency by minimising system costs.

The report also states that policymakers should carefully assess the evidence for longer-term reform such as locational pricing.

Adam Berman, Energy UK’s Deputy Director, said: “We need to ensure that the design of the power market is fit for a future where we need to meet a huge increase in the demand for electricity, reach ambitious energy security and climate change targets, and have the flexibility to get the maximum benefit from our low-cost renewable generation.

“Crucially, any reforms need to ensure that the planned £100 billion of industry investment this decade isn’t called into question. Reforms which lead to increases in the cost of investment, or investment delays, will make it harder to reach the government’s ambitious targets.