Zonal pricing proposals backed by peers
Plans to introduce a “zonal pricing” regime to the UK’s electricity market have been backed by an influential group of Lords.
A report from the Industry and Regulators Committee found regional pricing “should enable better use of existing grid capacity” and lower the cost of electricity, provided the transition and its risks are “managed well.”
The committee is comprised of influential peers including former Downing Street chief of staff Lord Udny-Lister and Baroness Dido Harding.
Zonal pricing has been championed by Octopus Energy, which believes it could play a critical role in cleaning up the energy grid by 2030.
But critics warn it would create a “postcode lottery” where some households are forced to pay far more based on where they live.
Writing in Morning Wire last month, the boss of Scottish energy giant SSE argued “it would inject more than five years of uncertainty, raise the risks and costs of investments, and ultimately leave us more exposed to gas prices for longer”.
“Ruling it out would generate an immediate boost to investment,” he added.
Energy secretary Ed Miliband is currently considering whether to take up the policy, with a decision due imminently.
“We believe that, on balance, zonal pricing should enable better use of existing grid
capacity and reduce the amount of grid that needs to be built,” the committee’s report concluded.
But it warned the government would need to “carefully assess the impacts on generators and major consumers that are unable to move in response to different prices,” including whether they should recieve transitional support.
A spokesperson for the government’s Department for Energy Security and Net Zero (DESNZ) said: “We need new infrastructure to protect family and national finances with energy security, through clean homegrown power we control.
“We are already overhauling the energy system, building the grid we need and connecting new power projects to reach our 2030 target.” It is due to make a decision on zonal pricing in mid-2025.