Homes in southern England could soon face increased energy bills as the government is set to introduce zonal pricing to encourage renewable energy development in densely populated areas.
Under the scheme, renewable energy companies will have the flexibility to charge higher rates for power generated closer to demand centres, incentivising the construction of wind and solar infrastructure near cities.
Tomorrow, Energy Secretary Claire Coutinho is expected to announce the initiative, potentially dividing the UK into generating zones with varying payment rates based on distance from consumers.
While supporters argue that it could reduce bills by an average of £45 annually and save £51 billion over 15 years, critics express concerns about fairness and potential landscape disruption.
In October, Ofgem released the Assessment of Locational Wholesale Pricing for Great Britain, a report compiled by FTI Consulting and Energy Systems Catapult.
Key findings from the report include projected bill reductions of £28 billion to £51 billion in a nodal market design between 2025 and 2040, compared to £15 billion to £31 billion in a zonal market design.
Societal benefits are estimated to range from £13 billion to £24 billion in a nodal market design, and £6 billion to £15 billion in a zonal market design during the same period.
Energy Live News has approached the Department for Energy Security and Net Zero for comment.
