Latest news with #zonalpricing
Telegraph
19 hours ago
- Business
- Telegraph
Miliband drops plans to charge homes in the South more for power
Ed Miliband has abandoned controversial plans to charge southern households more for electricity than those in the North amid a backlash from wind farm owners. The Energy Secretary has reportedly sided with opponents of proposals for so-called zonal pricing, following warnings it would imperil his clean power targets. Under the changes, regions would have paid different prices for electricity based on local supply and demand – meaning areas with more wind farms such as the North and Scotland would have paid comparatively less than the South at peak times. Advocates claimed it would also have cut bills for all households overall by removing the need for £27bn of grid upgrades and axing the payments made to wind farms to switch off when the network is busy. But wind farm owners including SSE, RWE and Scottish Power had warned that pushing ahead with the policy would have created huge uncertainty about their revenues and gummed up investment at a critical time for the Government. This risked derailing Mr Miliband's plan for a massive building programme to deliver Labour's pledge that the grid will operate on 95pc clean power by 2030. A government source said ministers had weighed up the arguments and concluded that the risks of the policy 'outweigh the purported benefits', according to the Guardian. They also said the changes would take years to implement. The mooted decision comes as the Government prepares to launch its latest renewable energy subsidy auction, known as AR7, in early August. Industry executives have repeatedly warned ministers that clarity was needed ahead of the auction. On Wednesday, a spokesman for the Department for Energy Security and Net Zero refused to comment on 'speculation' but did not explicitly deny the claims. However, a source familiar with the discussions confirmed that a decision had effectively been made and was now going through the Government's final sign-off process. The report triggered an immediate backlash from advocates of zonal pricing, including Octopus Energy and the Britain Remade campaign, who have warned that spiralling constraint payments to wind farms threaten to push up bills and undermine support for net zero.
Daily Mail
a day ago
- Business
- Daily Mail
Ed Miliband 'abandons zonal electricity pricing' plan that would have charged people in southern England more for power than Scots
Ed Miliband has shelved a controversial plan to make people in southern England pay more for their electricity than Scots. The Energy and Net Zero Secretary had been examining the idea of 'zonal pricing', which would reflect what it costs to produce and supply energy in each region, rather than what is currently a single countrywide price. It would have meant people living near wind farms or other clean power projects - most common in upland rural areas - paying less for electricity than those living in other parts of Britain. Supporters of a move to zonal pricing, such as Octopus Energy boss Greg Jackson, claim it could bring down bills overall, saving households billions of pounds on their energy bills. It could also be used to entice energy-hungry tech firms away from the South towards Scotland and the North But critics had warned it could create a 'postcode lottery' for homeowners and lead to a fragmented system. The Guardian reported that Mr Miliband had decided not to go ahead with the scheme - first suggested by the Conservatives - after receiving warnings that it could put off investors and make it harder to build wind farms. 'The government has been weighing this up carefully and concluded that the benefits of delivering the clean power mission at pace, particularly given the expected impact of imminent grid upgrades; the need to deliver on the coming renewables auctions; and the significant risk premium being attributed to the UK by international investors, would outweigh the purported benefits of zonal pricing – which at any rate would take beyond the next election to implement,' a source told the paper. However, Mr Miliband was criticised by campaigners who argued that not going ahead would raise bills for everyone in the long run. Sam Richards, chief executive of the Britain Remade campaign, tweeted: 'If reports are true this will lock *everyone* - not just Scotland - into higher bills for years as we will spend billions switching off wind farms when it's windy (rather than allowing them to sell power dirt cheap locally). A mistake.' Mr Jackson's company commissioned research that found Britons could save between £55-74billion by 2050 on electricity bills if the Government adopts zonal pricing. It is also claimed zonal pricing is a more efficient system and could address regional inequalities in the UK by boosting investment in areas where there is cheaper energy. Tech giants are putting pressure on ministers to encourage an AI data centre boom in remote areas of Britian by offering some of the cheapest electricity prices in Europe. But opponents said zonal pricing would merely create a 'postcode lottery' for energy bills, with those in the south facing sharply increased costs. In April Ecotricity founder Dale Vince said: 'Tens of millions could end up paying more for their energy than they do now. It makes no sense when Labour's mission is about cutting bills for all rather than a few. 'Zonal pricing is being presented as a solution but it's madness. Fragmenting our energy market into 12 different regions would create complexity, delays and unfairness.' Today he tweeted: 'Zonal is toast.'
The Guardian
2 days ago
- Business
- The Guardian
Ed Miliband abandons plan to charge less for electricity in Scotland
Ed Miliband has abandoned plans to charge southern electricity users more than those in Scotland, after senior officials warned it could put off investors and make it more difficult to build renewables. Sources have told the Guardian that the government has decided not to proceed with the scheme, known as 'zonal pricing', and that the decision will be announced once it has been signed off by the cabinet. The plan was first proposed by the Conservatives as a way to encourage heavy electricity users to relocate to areas where there is more generation, such as Scotland, and windfarms sometimes have to switch off because of a lack of demand. The proposals were heavily backed by Greg Jackson, the founder and boss of Octopus Energy, but triggered a backlash among many other energy companies such as SSE, Scottish Power and RWE. One source said: 'The government has been weighing this up carefully and concluded that the benefits of delivering the clean power mission at pace, particularly given the expected impact of imminent grid upgrades; the need to deliver on the coming renewables auctions; and the significant risk premium being attributed to the UK by international investors, would outweigh the purported benefits of zonal pricing – which at any rate would take beyond the next election to implement.' The energy department declined to comment. The proposals would have set lower electricity prices in areas where supply far outstrips demand, in an attempt to encourage industry to move into those areas and reduce the need to switch off generation. Windfarms are sometimes paid to power down when renewable energy threatens to overwhelm the grid. Zonal pricing could have cut the cost of renewing and updating the country's electricity grid by billions. A report by FTI Consulting predicted overall savings of £52bn for consumers over 20 years, while another, which was commissioned by Octopus, found the UK would need to spend £27bn less would need to be spent on major grid upgrades in the future. The plans threatened an outcry from the sector and the wider public, however. Alistair Phillips-Davies, the outgoing chief executive of SSE, said recently the plan would be a 'huge mistake', saying it would create a 'postcode lottery' where some households would pay £200 to £300 more because of where they live. An independent report co-authored by Rob Gross, the UK Energy Research Centre director, found the benefits of zonal pricing could easily be wiped out if renewable energy developers demanded higher subsidies to offset the risk of the new scheme. Miliband is already under pressure from Downing Street to show when his sweeping reforms to the energy system will bring down bills for ordinary consumers, with No 10 officials increasingly concerned about the threat of Reform UK. Downing Street intervened in the zonal pricing debate after aides to the prime minister, Keir Starmer, became concerned about the possible effect of rolling out plans which could lead to prices rise for some consumers. Some also worried about the impact on international investment, which is seen as key to building the energy infrastructure which the government has promised. The French company EDF confirmed on Tuesday it would take a 12.5% stake in the Sizewell C nuclear plant, boosting ministers' promises of a 'golden age' of nuclear power. Advisers held meetings with a number of energy companies recently to discuss potential alternatives, and the government has now decided to abandon zonal pricing altogether. The decision has gone to senior ministers in a process known as 'write-round', and will be announced before the next renewables auction which is scheduled for early August. Officials are now focused on finding alternatives to zonal pricing which might encourage businesses and manufacturers to locate to electricity-rich parts of the country. They include paying battery storage companies to build major capacity in Scotland, or paying them to turn up their capacity on particularly windy days. One government source said the search for other plans was 'where all the brain power is now being expended'.
Sky News
17-06-2025
- Business
- Sky News
Bosses of Octopus Energy and SSE clash over 'postcode pricing' proposals
The head of Britain's biggest energy supplier has claimed his competitors oppose proposals for so-called postcode pricing because they financially benefit from the current system. Octopus Energy chief executive Greg Jackson told Sky News his business's rivals were against customers being charged based on where they lived, rather than on a national basis, because they would lose out on profits. He said: "A very small number of companies that today get paid tens of millions, sometimes in a single day, to turn off wind farms and generate gas elsewhere, don't like it. "The reason you're seeing that kind of behaviour from the rivals is they are benefiting from the current system that's generating incredible profitability." The government is currently considering whether to introduce the policy, which is also known as zonal pricing. Energy secretary Ed Miliband is expected to make a decision on the proposals by this summer. Octopus has become Britain's biggest supplier with more than seven million customers. Mr Jackson has been a vocal proponent, as he said he wants to charge customers less and boost government electrification policies by having cheaper electricity costs. What is postcode pricing? Zonal pricing would mean electricity bills are based on what region you live in. Some parts of Britain, like northern Scotland, are home to huge energy producers in the form of offshore wind farms. But rather than feeding electricity to local homes and businesses, power goes into a nationwide auction and is bought to go across Britain. As the energy grid is still wired for the old coal-producing sites rather than the modern renewable generators, it's not straightforward to get electricity from where it's increasingly produced to the places people live and work. That leads to traffic jams on the grid, blocking paid-for electricity moving to where it's needed and a system where producers can be paid a second time, to power down, and other suppliers, often gas plants, are paid to meet the shortfall. Zonal pricing is designed to prevent paying the generators for power that can't be used. It would mean those in Scotland have lower wholesale energy costs while those in the south, where there is less renewable energy production, would have higher wholesale costs. Whether bills go up or down depends on implementation. Savings from one region could be spread across Britain, lowering bills across the board. Mr Miliband has said he's not going to decide to raise prices. However, SSE's chief executive Alistair Phillips-Davies described the policy as a "distraction" and said it could affect already agreed-upon upgrades of the national grid that will lower costs. "I think you've got a very, very small number of people who are asking for this. It's just a distraction. We should remove it now," he said. While Octopus Energy estimates that said postcode pricing could be introduced in two to four years, Mr Phillips-Davies said it could take until 2032 before it was implemented, by which time Britain would have "built much of the networks that are required to get the energy from these places down into the homes and businesses that actually need it". "We just need to stay true to the course," he added. Unions, as well as industry and energy representatives, have also spoken out against the policy. Opponents include eco-tycoon Dale Vince and trade body UK Steel. A joint letter signed by SSE, UK Steel, Ceramics UK and British Glass, along with the unions GMB, Unite and Unison, said zonal pricing could lead to scaled-back investment due to uncertainty and higher bills. A separate letter signed by 55 investors, including Centrica and the Ontario Teachers' Pension Plan, has also criticised the policy. 1:21 However, Mr Jackson said many investors had not voiced opposition, with thousands of small and medium businesses instead backing the policy in the hope of paying less on energy bills.
Telegraph
11-06-2025
- Business
- Telegraph
‘More wind farms in the South' under Miliband's regional energy blueprint
Plans to overhaul Britain's energy market being studied by Ed Miliband would prompt a surge in the number of wind farms in the South of England, officials have confirmed. Fintan Slye, the chief executive of the National Energy System Operator (Neso), said breaking the electricity market into regions under so-called zonal pricing would encourage developers to put turbines up in the South. He backed the idea and said the current system of setting power prices nationally was giving renewable developers the wrong 'price signals' over where to locate wind farms. In a speech at the Royal Society, Mr Slye said he wanted renewable developers to 'move south' and build more wind and solar farms closer to where demand is strongest. Mr Slye said: '[Zonal pricing] will incentivise the development of wind and solar farms in southern areas but it will also encourage energy intensive developments in the North and Scotland.' Under zonal pricing, Britain would be split into regions and energy prices in each area would be set based on local supply and demand. In practice, households in the South would pay more than those in the North – where most wind farms are concentrated.
