The UK government has recently scrapped a proposed overhaul of its electricity market known as zonal pricing. The plan aimed to divide Britain’s wholesale electricity market into zones. This means that householders in some parts of the UK would be paying more for their energy than in other regions.
What is zonal pricing?
The UK currently has one national wholesale electricity price. This means everyone pays the same rate, no matter where they live.
If approved, zonal pricing would divide Great Britain into regions. Each region would have its price based on local supply and demand.
People in areas with easy access to renewable energy, like parts of Scotland, would benefit from zonal pricing through lower prices. However, for people in areas like southeast England, where green energy is less available, electricity prices would be higher.
In theory, the plan could provide many pluses to the structure of the UK energy market. By matching prices with local energy supply, the UK’s energy network could save money. It would reduce wind curtailment and attract factories and green energy projects to areas capable of producing extra electricity.
However, many of the UK’s energy giants found it difficult to agree…
Who is in favour of zonal pricing and why?
The plan’s potential to save costs has drawn support from Octopus Energy and FTI Consulting. FTI Consulting is the advisory firm that conducted the main independent analysis of the project.
Both companies say zonal pricing could save consumers £3.7 to £5 billion each year. This could add up to over £55 billion by 2050!
Right now, thousands of kilowatts of clean, cheap power from wind farms are being wasted every day. The plan’s supporters argue that it’s a better way of using plentiful amounts of renewable energy and saving money by preventing wind curtailment.
What is wind curtailment?
Right now, thousands of kilowatts of clean, cheap power from wind farms are being wasted every day. The plan’s supporters argue that it’s a better way of using the UK’s plentiful amounts of renewable energy and will save money by preventing wind curtailment.
The current UK Grid can only deliver power to towns and cities from nearby gas and coal power stations. As there is not enough capacity to move or store renewable energy, wind farms are instead paid to turn off their turbines. This is known as wind curtailment and is done to stop the electrical grid from becoming overloaded. It also wastes billions of pounds of money and energy!
Regions able to generate a cheaper electricity supply are likely to attract industry and investment in their infrastructure. Supporters also believe that removing regional pricing could cause these areas to miss out on creating more local jobs and financial opportunities.
Who are those against zonal pricing and why?
Public surveys show that 85–90% of people in England and Wales oppose zonal pricing. They worry it will create an energy cost “lottery” based on where they live.
Unlike FTI Consulting, other independent analysts warn that the plan could lead to higher risk premiums. They fear this will scare off investors, rather than attract them.
Large energy companies such as SSE, Scottish Power, and RWE also oppose the plan. They have concerns that zonal pricing may negatively impact clean energy investment because businesses are unsure about how much money they will make. Regulators like Ofgem and National Grid also share this concern.
Other negative points include the length of time that it will take to change the UK into multiple pricing zones. Energy experts claim that the timescale is likely to reach into the 2030s. They also estimate that the plan will add £3 billion in extra costs each year.
How was the deciding vote made?
On July 10, 2025, Energy Secretary Ed Miliband announced that zonal pricing has been rejected. His statement read:
‘Building clean power at pace and scale is the only way to get Britain off the rollercoaster of fossil fuel markets and protect families and businesses for good.
“As we embark on this new era of clean electricity, a reformed system of national pricing is the best way to deliver an electricity system that is fairer, more affordable, and more secure, at less risk to vital investment in clean energy than other alternatives.
“Our package of reforms will protect consumers and secure investment as we drive to deliver our clean power mission through our plan for change.”
This decision was made following a consultation process that began in 2022.
So, what will happen now?
Instead of zonal pricing, the government has pledged to make changes that include:
- How the Grid is planned and built, and how people will pay to use it.
- Installing more batteries to store extra electricity in certain areas.
- They will help to plan where new green energy projects and connecting power lines will go.
- Reducing the fees paid to wind farms to stop generation to avoid grid congestion.
Key players such as Ofgem, SSE, and Centrica welcome these decisions as they believe it will bolster investor confidence. Supporters of zonal pricing, like Octopus Energy, argue that the reforms do not do enough. They believe these changes do not address the UK’s large-scale structural issues.
The pros and cons of zonal and national pricing
There’s no doubt that there are benefits and disadvantages for zonal and national pricing. The following table clearly outlines the pros and cons of both:
| Zonal Pricing | Uniform National Pricing (Now Chosen) |
| Pros: It’s fair, offers investment stability, and simplicity . | Pros: It’s fair, offers investment stability, and simplicity. |
| Cons: Not all postcodes will benefit. There is also a risk to investment due to it being a complex plan. | Cons: It does not offer local prices and could waste the benefits of renewable energy. |
How does the decision affect you and your local area?
As with all Government decisions, there are winners and losers. But how does this affect people on a local level?
If you live in Scotland or a renewables-rich area, zonal pricing would have been likely to bring lower bills. However, if you live in the south of England, you probably have faced higher energy costs.
Although a national energy price system protects households and businesses from regional price differences, it also means losing out on the opportunity for lower bills and on making the best use of energy in each area.
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