Zonal pricing in Great Britain
Energy transition Energy consultancy Whole system modelling Networks
Accessing the impacts of the 'Beyond 2030' network plans
Our newly published report with SSE plc explores impacts of moving the GB market to zonal pricing under the National Electricity System Operators ‘Beyond 2030’ network plans. Building on our previous work with DESNZ, this report assesses how updated grid plans combined with movements towards a more strategically planned energy system changes the system benefits case for zonal pricing.
Learn how these critical changes affect the overall impact of moving the GB market to zonal pricing and the implications that reforms to interconnector redispatch could have in a Reformed National Market. Read on for a deeper dive into the key results from the analysis and what this means for the ongoing Review of Electricity Market Arrangements (REMA) debate.
Zonal pricing in Great Britain
Explore the reportScroll down for our key insights
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Significant reduction in zonal pricing benefits
£0-11bnBenefits decrease from £5-15bn under ‘NOA7 Refresh’ grid plans from 2022 to £0-11bn under the 2024 ‘Beyond 2030’ grid plans combined with offshore wind locations being determined by seabed leasing. -
Interconnector redispatch reform impact
80% reductionImprovement to redispatch of interconnectors could eliminate the system benefits of zonal pricing. Even delivering partial redispatch can reduce the benefits demonstrating the potential for substantial savings through redispatch reform. -
Sensitivity to investment costs
0.6 percentage pointsZonal pricing benefits are highly sensitive to the cost of capital. A small increase in capital costs can nullify the benefits, underscoring the importance of stable investment conditions for the cost of capital eliminates the system benefits.
Our recommendations for the Clean Power Plan
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The ability for interconnectors to deal with constraints is a fundamental driver of the case for zonal pricing. Making incremental reforms to allow better redispatch of interconnectors under national pricing could be delivered in advance of 2030, bringing consumer and system benefits and reducing reliance on unabated gas for balancing the system.
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Grid constraints between England and Scotland are reduced by the ‘Beyond 2030’ network plans, but structural constraints in other parts of the system continue (e.g. SC1 boundary). Reinforcement in these areas could have benefits in any scenario, with additional value if incremental interconnector reforms cannot be delivered.
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Given the change in zonal pricing impacts from the ‘Beyond 2030’ network plans, a review of the case for zonal pricing by DESNZ will be required, including any upcoming generation and network plans in the Clean Power Plan for 2030.
