Two big UK battery storage developers favour zonal pricing
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.'
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