The UK energy regulator, Ofgem, is backing the idea of introducing zonal pricing for electricity as the next step forward, Ofgem’s chief executive Jonathan Brearley said during an interview on Montel News’ Plugged In podcast on Friday. This comes amid ongoing debates over one of the country’s most contentious power market reforms.
The UK government is considering a shift from the current nationwide electricity pricing system to a zonal pricing model.
Under the proposed plan, the UK electricity market would be divided into several regions, or “zones.” Each zone would have its own electricity prices, determined by factors like local supply, demand, and grid access. Areas with a higher supply of electricity, such as Scotland where renewable energy generation is strong and demand is low, would experience lower prices. In contrast, regions like southeast England, where demand is high but supply is limited, would face higher prices.
The idea of zonal pricing has sparked mixed reactions within the energy industry.
While Ofgem has previously remained neutral on the issue, Brearley now appears to support it. “Given the changes occurring in this sector, keeping the market as it is doesn’t seem realistic,” Brearley told the podcast. “After much discussion within Ofgem, we’ve concluded that zonal pricing is the best way forward.”
The UK government plans to make a decision on zonal pricing later this year.
As part of its goal to achieve a fully clean power grid by 2030, the UK has made significant progress in clean energy, including being the first G7 country to phase out coal power. However, many analysts warn that this target may be out of reach.
Despite advances in renewable energy, the UK is likely to miss its targets for wind and solar capacity due to operational challenges and investment delays, according to consultancy Cornwall Insight. This has made it difficult to meet the government’s 95% clean energy goal by 2030.
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