Zonal pricing is a costly distraction that risks investment, raises bills, and undermines the UK’s clean energy transition.
A Golden Opportunity at Risk
The UK stands on the precipice of a historic transformation – rewiring and rebuilding its energy system to achieve clean power by 2030. The Government’s Clean Power Mission promises to unlock £40 billion a year in private investment, generating thousands of jobs and bolstering energy security. However, a controversial proposal to introduce ‘zonal pricing’ threatens to derail this progress, creating a postcode lottery that risks higher bills and a decline in investment.
The Political Landscape
The UK’s energy sector is at a critical point. The Government’s commitment to clean power is a beacon of hope in an otherwise challenging fiscal environment. However, the ongoing consultation under the Review of Electricity Market Arrangements (REMA) has introduced uncertainty, with ministers considering zonal pricing – a model that would split the UK into regions with differing electricity costs based on local supply and demand.
A decision on the matter is expected this summer, and industry leaders, trade bodies, and investors have been vocal in their opposition. A coalition of 55 major companies, 16 trade bodies, and six of the largest trade unions have called on the Government to rule out zonal pricing, citing its detrimental impact on energy bills and investment.
The Case Against Zonal Pricing
1. A Postcode Lottery for Billpayers
In countries where zonal pricing has been implemented, customers have faced stark disparities in energy costs, with some paying £200-£300 more per year than equivalent households elsewhere. In the UK, this could mean consumers in England and Wales bearing the brunt of higher electricity bills while energy remains cheaper in northern Scotland, exacerbating regional economic inequalities.
2. Disincentivising Investment in Clean Energy
The UK’s clean power transition relies on large-scale wind and solar farms, many of which are naturally located in remote areas. Zonal pricing would disincentivise investment in these projects, making them financially unviable. Industry leaders from Make UK and Steel UK have dismissed the idea that businesses would relocate closer to power sources due to minor cost incentives.
3. Higher Costs for Consumers and Delayed Progress
Far from improving the system, zonal pricing would increase the cost of clean power infrastructure. Analysis by LCP Delta found that under a zonal model in 2035, wholesale electricity prices would be higher in 97% of the UK. Furthermore, the added risk to investors would drive up financing costs, adding an estimated £50 billion to the energy transition. Already, some projects—like the planned extension of the Blairidh onshore wind farm—have been scrapped due to uncertainty over zonal pricing.
Industry Voices Speak Out
Alistair Phillips-Davis, CEO of SSE, warns that “zonal pricing would be a political and economic disaster,” arguing that “the UK is on the cusp of the greatest transformation since the Industrial Revolution, but this could all be in jeopardy if the Government deviates from the plan.”
Claire Mack, Chief Executive of Scottish Renewables, echoes this sentiment: “Any potential benefits of zonal pricing have not been convincingly demonstrated, and the significant risks involved threaten the private investment needed to keep vital Scottish projects viable.”
Jane Cooper, Deputy CEO of RenewableUK, adds: “It’s hard to see how the Government could succeed in delivering clean power by 2030 whilst also introducing this complex and controversial scheme.”
A Smarter Path Forward
There is broad consensus that reforms are needed to optimise the UK’s electricity market, but zonal pricing is not the solution. Instead, improvements can be made within the existing national framework to ensure fair pricing and efficient energy distribution without the added risks and costs of zonal pricing.
The UK Government must act decisively to rule out zonal pricing and provide the policy clarity needed to unlock investment. With the clock ticking towards 2030, now is the time to focus on accelerating clean power deployment—not adding unnecessary complexity and risk.
Final Thought
Britain has an opportunity to lead the world in clean energy while driving economic growth and lowering bills. But introducing zonal pricing would be a costly distraction that undermines investment and consumer confidence. The message from industry and consumers alike is clear: we need a national energy strategy that works for everyone, not a postcode lottery that benefits the few at the expense of the many.
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