National Grid calls for local energy pricing to drive down household bills
The National Grid has called for a break-up of the electricity market so that different prices are charged in different parts of the country.
It wants to bring so-called “nodal pricing” into the wholesale market, which divides the national network into different nodes, each with their own wholesale electricity price which reflects the cost of supplying electricity at that location.
When coordinated by a system known as a central dispatch, National Grid believed this could help unlock efficiency savings and provide an easier route to market for small, flexible assets.
The proposals raise the possibility of consumers paying different prices for their power up and down the country, though it’s not yet clear which areas would face cheaper or more expensive tariffs.
This follows a study from its system operator, National Grid ESO, which outlines the existing wholesale market is contributing to a dramatic rise in constraints and inefficiencies balancing the network.
If left unchanged, the report suggests current national pricing model will impose excessive and unnecessary costs on consumers.
Cian McLeavey-Reville, senior manager of National Grid ESO, said: “The options presented today lay the groundwork for a future energy system which is secure, reliable and offers value for money. We must transform our markets, not only to encourage renewables onto our energy system but also to ensure that clean energy can be delivered when and where it is needed for maximum consumer benefit.
The scale of the benefits is being assessed by market regulator Ofgem.
Moving to a locational pricing system would require legislative and regulatory changes and would have to be signed off by the government.
The next phase of analysis by ESO will include an assessment of the implementation and implications of nodal pricing and central dispatch.