New findings from LCP Delta reveal potential system benefits of £5-15 billion from adopting a zonal locational pricing model, compared to the current national pricing system.
However, uncertainties linger regarding the impact of increased capital costs for building new power plants under locational pricing.
Commenting on the government’s publication of the REMA consultation, Chris Matson LCP Delta, said: “Locational pricing is a complex topic and one that has understandably generated a huge amount of interest in the sector.
“But in the Secretary of State’s own words, “There are no easy solutions in energy, only trade-offs.”
“Our analysis shows that a move to zonal pricing has the potential to bring benefits to both households and the wider British electricity system.
“However, these benefits may be offset by the additional risk premiums faced by investors, given the dramatic change to the way generators would be paid, as well as the sheer scale of investment needed to reach net zero.”
