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The UK government has confirmed it will ditch a controversial plan to split Britain’s wholesale electricity market into zones, which could have resulted in the south of England paying more for electricity than Scotland.
Ministers announced on Thursday they would not push ahead with so-called zonal pricing, ending a long-running debate that has divided the energy industry.
The proposals were part of a package of potential reforms to the electricity market that has been considered in government for several years to try to make it more efficient and make better use of new wind and solar power generation.
But, in a statement, the government said retaining a single national wholesale price was the “right way to deliver a fair, affordable, secure, and efficient electricity system”.
Opponents of the move had warned it would deter the massive investment in new wind generation needed to meet the government’s target of decarbonising the electricity system by 2030.
The government said it would instead look at less radical reforms, such as a review of the charges generators pay to access the transmission network and developing more battery storage sites. It is also taking more control over where different types of generation can be located.
Martin Pibworth, chief executive designate of FTSE 100 energy company SSE, said the decision brought “welcome clarity”.
“Zonal pricing would have added risk at a time when the UK needed to accelerate its clean power transition, making energy bills more expensive,” said Pibworth.
Gareth Stace, director-general at UK Steel, said he was pleased the “risky proposal” had been ruled out. “Zonal pricing would have penalised existing industrial sites, driving up electricity prices, further damaging our ability to thrive, foster jobs, and undermining much needed investment in steelmaking,” he said.
However, others argue that abandoning the plans runs the risk of higher costs. Caroline Bragg, chief executive of industry group Association for Decentralised Energy, said: “Everyone knows the old system is dead.”
“Piecemeal tweaks won’t deliver the lower bills for all, that Ofgem itself says is possible.”
