
The UK government is set to abandon zonal pricing reforms in favour of maintaining a single market for the country, Bloomberg has reported.
Citing people familiar with the matter, the news site said that government officials have told certain people that they are leaning towards retaining a single wholesale energy market for the UK.
The UK has been undergoing the Review of Electricity Market Arrangements (REMA) process, which has been floating ideas on reforming the UK’s energy system.
Zonal pricing would see the UK divided into 12 zones, each with its own power price. These would be determined by supply and demand – regions with high power demand and few sources of power, such as the south of England, would have higher prices.
Meanwhile, less populated regions with high capacity, such as the north of Scotland, would have lower power prices.
However, sources have said that a final decision hasn’t not been made yet, and will need the involvement of UK prime minister Keir Starmer first.
A statement from the Department of Energy Security and Net Zero (DESNZ) confirmed this, saying that “no decision has been made”.
The zonal pricing debate has pulled in opinions and players from across the energy sector.
In favour are groups including Octopus Energy, Ofgem, and the National Energy System Operator (NESO).
They argue that dividing the UK into regional power markets will bring down power prices across the country, especially for those in Scotland.
This, in turn, will provide an economic boost, attracting power-intensive industries to the areas to take advantage of cheap electricity.
On the other side are Centrica, Scottish Renewables and many players in the offshore wind sector. They warn that the cheap power will never materialise, as the low prices will make projects unviable in less populated regions.
In particular, Scotland could lose out on 8,000 jobs and £30 billion of investment if zonal pricing were implemented, a Biggar Economics report produced for the Fairer Energy Future campaign group outlined.