Latest news with #zonalpricing
Sky News
5 days ago
- Business
- Sky News
Bosses of Octopus Energy and SSE clash over 'postcode pricing' proposals
The head of Britain's biggest energy supplier has claimed his competitors oppose proposals for so-called postcode pricing because they financially benefit from the current system. Octopus Energy chief executive Greg Jackson told Sky News his business's rivals were against customers being charged based on where they lived, rather than on a national basis, because they would lose out on profits. He said: "A very small number of companies that today get paid tens of millions, sometimes in a single day, to turn off wind farms and generate gas elsewhere, don't like it. "The reason you're seeing that kind of behaviour from the rivals is they are benefiting from the current system that's generating incredible profitability." The government is currently considering whether to introduce the policy, which is also known as zonal pricing. Energy secretary Ed Miliband is expected to make a decision on the proposals by this summer. Octopus has become Britain's biggest supplier with more than seven million customers. Mr Jackson has been a vocal proponent, as he said he wants to charge customers less and boost government electrification policies by having cheaper electricity costs. What is postcode pricing? Zonal pricing would mean electricity bills are based on what region you live in. Some parts of Britain, like northern Scotland, are home to huge energy producers in the form of offshore wind farms. But rather than feeding electricity to local homes and businesses, power goes into a nationwide auction and is bought to go across Britain. As the energy grid is still wired for the old coal-producing sites rather than the modern renewable generators, it's not straightforward to get electricity from where it's increasingly produced to the places people live and work. That leads to traffic jams on the grid, blocking paid-for electricity moving to where it's needed and a system where producers can be paid a second time, to power down, and other suppliers, often gas plants, are paid to meet the shortfall. Zonal pricing is designed to prevent paying the generators for power that can't be used. It would mean those in Scotland have lower wholesale energy costs while those in the south, where there is less renewable energy production, would have higher wholesale costs. Whether bills go up or down depends on implementation. Savings from one region could be spread across Britain, lowering bills across the board. Mr Miliband has said he's not going to decide to raise prices. However, SSE's chief executive Alistair Phillips-Davies described the policy as a "distraction" and said it could affect already agreed-upon upgrades of the national grid that will lower costs. "I think you've got a very, very small number of people who are asking for this. It's just a distraction. We should remove it now," he said. While Octopus Energy estimates that said postcode pricing could be introduced in two to four years, Mr Phillips-Davies said it could take until 2032 before it was implemented, by which time Britain would have "built much of the networks that are required to get the energy from these places down into the homes and businesses that actually need it". "We just need to stay true to the course," he added. Unions, as well as industry and energy representatives, have also spoken out against the policy. Opponents include eco-tycoon Dale Vince and trade body UK Steel. A joint letter signed by SSE, UK Steel, Ceramics UK and British Glass, along with the unions GMB, Unite and Unison, said zonal pricing could lead to scaled-back investment due to uncertainty and higher bills. A separate letter signed by 55 investors, including Centrica and the Ontario Teachers' Pension Plan, has also criticised the policy. 1:21 However, Mr Jackson said many investors had not voiced opposition, with thousands of small and medium businesses instead backing the policy in the hope of paying less on energy bills.
Telegraph
11-06-2025
- Business
- Telegraph
‘More wind farms in the South' under Miliband's regional energy blueprint
Plans to overhaul Britain's energy market being studied by Ed Miliband would prompt a surge in the number of wind farms in the South of England, officials have confirmed. Fintan Slye, the chief executive of the National Energy System Operator (Neso), said breaking the electricity market into regions under so-called zonal pricing would encourage developers to put turbines up in the South. He backed the idea and said the current system of setting power prices nationally was giving renewable developers the wrong 'price signals' over where to locate wind farms. In a speech at the Royal Society, Mr Slye said he wanted renewable developers to 'move south' and build more wind and solar farms closer to where demand is strongest. Mr Slye said: '[Zonal pricing] will incentivise the development of wind and solar farms in southern areas but it will also encourage energy intensive developments in the North and Scotland.' Under zonal pricing, Britain would be split into regions and energy prices in each area would be set based on local supply and demand. In practice, households in the South would pay more than those in the North – where most wind farms are concentrated.
Telegraph
05-06-2025
- Business
- Telegraph
Starmer intervenes on plans for higher energy bills in the South
Sir Keir Starmer has intervened in controversial net zero proposals to make homes and businesses in the South pay more for power than those in the North, amid fears of a voter backlash. In recent days, Downing Street has taken a growing interest in plans for so-called zonal electricity pricing being considered by Ed Miliband, the Energy Secretary. No10 officials have contacted industry chiefs to signal that the Prime Minister is overseeing the potential policy. Downing Street is understood to have requested a further review of the costs and benefits – raising the prospect that the idea could be killed off or kicked into the long grass. Zonal pricing aims to capture efficiencies by lowering the relative cost of electricity close to wind farms and has already sparked a bitter war of words among energy bosses. It would result in Britain being divided into zones, with prices in each based on local supply and demand. There is currently one national price. Supporters claim the switch would lead to savings of £52bn for consumers overall, as well as a £27bn saving on grid upgrades that would no longer be required. Sir Keir 's intervention is the latest sign of tensions within Labour over net zero. Pledges on job creation, investment in carbon capture technology, and heat pump and electric car targets have all sparked fierce policy debates across Whitehall. Mr Miliband's officials are said to be supportive of zonal pricing but the Energy Secretary himself has yet to declare a position. Whitehall sources insisted no final decisions had been made and that a range of views were still being considered. The involvement of Downing Street will be interpreted as a sign of political anxiety about the controversial policy. Nigel Farage's Reform UK has made net zero and the cost of energy a key campaign issue and pledged to fight plans to roll out renewable power projects and pylons across the countryside. Giving a speech in Scotland this week, Mr Farage likened the Government's net zero policies to 'the next Brexit'. In practice, a zonal system would mean higher wholesale power prices for London and the South compared with the North and Scotland, where most wind farms are concentrated. But supporters say it would slash bills for consumers overall, by reducing the need for costly grid upgrades and slashing the amount paid to wind farms to switch off. A report by FTI Consulting this year predicted overall savings under zonal of £52bn for consumers over 20 years. Another report by the same firm, commissioned by Octopus Energy and shared with Mr Miliband's officials, also found that £27bn less would need to be spent on major grid upgrades under the reforms, resulting in nearly 2,000 fewer miles of cables. The claims of savings are disputed by opponents, who say a major market shake-up will deter investment and imperil the Government's plans for a renewable energy construction boom this decade. Ministers have argued that the Government's strategy for a power system running almost entirely on renewables by 2030 will bring down prices and provide Britain with greater energy security. Asked to comment on the involvement of Downing Street, a spokesman for Mr Miliband's department refused to comment on 'speculation'. 'It suggests Starmer does not trust Miliband' But Andrew Bowie, the shadow energy minister, said the Prime Minister's move to scrutinise zonal pricing more closely implied lack of faith in the Energy Secretary. He said: 'It suggests that the PM does not trust Ed Miliband to take a decision of this magnitude.' The Government has previously pledged to make a decision by the middle of this year, ahead of a renewable energy auction in the summer that will hand subsidies to major wind farm projects that are vital to Mr Miliband's clean power goals. That has prompted warnings from wind farm developers that embarking on a major shake-up of the electricity market now will create unnecessary uncertainty, leading to the cancellation of schemes or demands for higher power prices to compensate. Keith Anderson, the chief executive of Scottish Power, last month urged ministers not to 'snatch defeat from the jaws of victory' by pushing ahead with the reforms. At the same time, ministers are under intense pressure to cut energy bills for households and businesses following Mr Miliband's pre-election promise to slash them by £300 a year. Critics say the existing national pricing system also distorts the market – for example, by encouraging batteries to charge at the wrong times and inter-connectors to send power from Britain to Europe even when it is needed in the South. In recent months, the Government has sought to quell wind developer concerns about the policy by suggesting that existing schemes will benefit from 'grandfathering' – meaning they would retain current payment terms. Mr Miliband is also weighing up an alternative proposal that would seek to reform the national electricity pricing system to better reflect 'locational signals', although these have not been fleshed out. A key moment in the debate is likely to come next week, when Mr Miliband is expected to make his recommendation, for or against zonal pricing, to Downing Street. If zonal pricing is implemented it would be the biggest shake-up of the market since privatisation in the 1990s. Richard Tice, Reform UK's energy spokesman, said: 'Zonal pricing is a trick designed to try to cover up the ever-rising energy bills we face because of subsidies to renewable energy. 'Keir Starmer is now panicking over the costs of renewables and the loss of votes to Reform.'
Telegraph
04-06-2025
- Business
- Telegraph
Miliband urged to save net zero through higher bills in the South
Ed Miliband must ramp up energy bills across London and southern England to hit net zero targets, a parliamentary committee has said. The Energy Secretary is likely to miss his target of making the electricity grid 95pc carbon free by the end of the decade unless he embraces so-called zonal pricing, a new report from the Lords industry committee warned. Such a change would mean splitting Britain's single electricity market into almost a dozen regions, with the price of power determined by supply and demand within each area rather than set nationally. In practice, prices would surge in London, southern England and the Midlands where renewables are in short supply, but plummet in Scotland because of its plentiful wind farms. The change would therefore be hugely controversial. However, it would encourage companies to build renewable power infrastructure nearer to where prices are high, cutting down the amount of new pylons, cables and transformers needed to achieve a decarbonised grid. 'Regional zonal pricing should enable better use of existing grid capacity and lower the cost of electricity, provided that the transition and its risks are managed well,' the report said. Even with such changes, Mr Miliband's clean power by 2030 pledge looks increasingly likely to fail, the Lords warned. Baroness Taylor of Bolton, the committee's chairman, said: 'Given the scale of changes needed to the planning, regulation and delivery of energy infrastructure, and the UK's historic [poor] record of delivering major infrastructure projects, our report questions the feasibility of meeting the clean power target. 'Time is already running out, and there is no room for complacency. The Government and the sector must ramp up their efforts to have a chance of success.' Zonal pricing has been under consideration in the review of electricity market arrangements initiated by the previous government three years ago. An announcement is now imminent. Government officials have advised Mr Miliband to press ahead with the policy, but the Department for Energy Security and Net Zero (Desnz) has refused to say if he favours the idea. Mr Miliband has insisted he will not make any change that leads to higher bills for people. Regardless, the machinery for zonal pricing is already being put in place. Ofgem recently announced plans for 11 'Regional Energy Strategy Boards'. Nine would be in England with one each in Scotland and Wales, all overseen by the National Energy System Operator (Neso). The boards would be similar to the municipal electricity and gas boards that oversaw energy supplies before privatisation, comprising local councillors and energy company representatives. Julian Leslie, Neso's chief engineer and director of strategic energy planning, said the boards would 'ensure that local communities play a central role in planning how they decarbonise and how their contributions support national strategic energy planning'. Sam Richards, of Britain Remade, a pro-growth campaign group, said the UK needed a 'clean energy revolution to lower bills and create high-quality jobs'. He added: 'Moving to zonal pricing is a crucial step in achieving this ... It would help make smarter use of our existing grid, bring down electricity costs and attract the investment needed to build clean energy where it's most abundant.' A Desnz spokesman said: 'We need new infrastructure to protect family and national finances with energy security, through clean home-grown power we control.' The three years of discussions around zonal pricing have generated growing tensions in the UK energy industry. John Pettigrew, the National Grid chief executive, last month spoke out against it, warning the disruption would be a huge distraction. Hitachi, suppliers of half the transformers, inverters and switch gear vital to the UK's 'great grid upgrade', have issued similar warnings. Others are strongly in favour, including Greg Jackson, the Octopus Energy boss.
Times
27-05-2025
- Business
- Times
Two big UK battery storage developers favour zonal pricing
Two of Britain's biggest battery storage developers have come out in favour of regional electricity pricing, despite opposition from their peers who argue that the radical shake-up will deter investment. Gresham House and Statera both told The Times that zonal pricing would cut the costs of operating Britain's energy system, ensuring that batteries were built in the right locations to help deal with surplus wind power. Ben Guest, head of energy transition at Gresham House, operator of the UK's largest battery storage fleet, said it believed zonal pricing was 'an essential step for the UK's electricity system' to help 'motivate investment where it is most needed'. The government is expected to decide imminently whether to ditch Britain's national wholesale electricity price and introduce a system with about seven to twelve regional zones. Prices in each zone would vary depending on the supply and demand balance in the area, ensuring that wind farms in remote locations could not sell their electricity to consumers at the other end of the country if there were not sufficient cables to physically deliver the power. At present the National Electricity System Operator spends hundreds of millions of pounds every year dealing with such cabling constraints by paying wind farms to switch off and gas plants nearer demand to fire up and replace them. Batteries installed near wind farms could address the problem by storing surplus power when it is windy and discharging it in calm weather, smoothing out supplies. However the national market does not always provide the correct price signals: batteries in Scotland might discharge because the national price is high, even if their area is already swamped with power. In a zonal system, the excess power would depress the regional price, encouraging the battery to charge up. Zonal pricing is highly divisive in the energy industry, with wind farm developers and other generators generally opposed and some household suppliers and consumer groups in favour. Guest said Gresham's analysis showed that 'a well-designed zonal pricing system can reduce wholesale energy costs and reduce the need for a lot of the planned electricity network upgrades and associated pylons'. Zonal pricing would 'incentivise energy storage, the cost of which has been falling sharply, to store renewable energy when generation exceeds demand and then deliver it across zonal boundaries when renewable generation is low and constraint limits are not reached', he said. Tom Vernon, chief executive of Statera Energy, which is building Britain's largest battery storage site at Trafford Park in Greater Manchester, said: 'Developing and dispatching batteries in the right locations is critical for cost-effectively balancing the grid. At Statera, we support zonal pricing because it will make the power system more transparent, and provide a clear price signal for the efficient operation and location of demand and generation.' He said he was 'confident that zonal pricing will lower costs in the long run'. However, other leading battery storage developers said they opposed the change. Harmony Energy said it feared that 'the uncertainty created by such a fundamental shift in market design creates an unnecessary risk in relation to investor confidence at a time when the country needs to get on building out critical infrastructure'. And Amit Gudka, chief executive of Field, said zonal pricing would 'slow down investment' and building out the network should be the priority instead of 'tinkering with the market'. Zenobe, another battery storage company, has claimed that even the prospect of zonal pricing has already 'slashed investor confidence and is inhibiting battery build-out', as the complexity and uncertainty of zonal pricing makes it harder to secure agreements to sell power. A spokesman for the Department for Energy Security and Net Zero said: 'We are considering reforms to Britain's electricity market arrangements, ensuring that these focus on protecting bill-payers and encouraging investment. We will provide an update in due course.'
