ByCharles Kennedy– Feb 07, 2025, 10:30 AM CST
The UK energy market regulator Ofgem favors the idea of introducing zonal pricing in Britain as the best way to move forward, Ofgem chief executive Jonathan Brearley told Montel News’ Plugged In podcast on Friday, weighing in on one of the most controversial power market reforms considered in the country.
The UK government is considering the so-called zonal pricing for electricity prices in Britain to replace a nationwide pricing system.
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Under the proposed reform, zonal pricing would essentially split the electricity market into several geographical zones. Each of these zones would have different power prices, based on their supply, demand, and grid availability and access. This means that areas where electricity supply is higher, including high supply from renewables, and demand is low, would have lower prices. Such a place is most of Scotland.
However, areas in southeast England, which have high demand but lower supply, would see higher electricity prices.
The ‘zonal pricing’ debate has stirred mixed reactions from industry.
Ofgem, the regulator, which has refrained from a firm position so far, now looks supportive of zonal pricing.
“With the amount of change that’s in this sector, the idea we leave this market as it is, I don’t think is credible,” CEO Brearley told the Montel podcast.
“We’ve had a robust debate within Ofgem [and] we have come to the view that zonal pricing is the best way forward,” Brearley added.
The UK government aims to reach a decision on zonal pricing later this year.
Britain has a goal to have a clean power grid by 2030, but many analysts say this isn’t achievable.
While the UK has made huge progress in clean energy installations in recent years – including becoming the first G7 nation to phase out coal power generation – much more is needed to have 95% clean power by 2030, as recently set by the government.
Despite government pledges and efforts to have clean power provide nearly all of Britain’s electricity by 2030, the UK is on track to miss its wind and solar capacity targets as operational and investment constraints are hampering a faster pace of installations, consultancy Cornwall Insight said last month.
By Charles Kennedy for Oilprice.com
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