The Octopus Energy CEO has pinpointed one measure that could reduce energy bills across much of the UK. Zonal energy pricing is a system where electricity prices vary by area, to reflect what it costs to produce and supply the power there.
Greg Jackson believes that introducing the means of pricing would take £3.7bn per year from the country’s energy bills, the equivalent of £55bn by 2050. He told Sky News: “We have a postcode lottery today. Ironically people in Merseyside, Scotland and the north of England pay more for electricity than people in London. Zonal pricing helps rebalance that and more importantly it would reduce the total electricity bill in the UK by about £4 billion a year, potentially rising to £7bn a year.
“It does that because in today’s electricity market, essentially every half hour, the people who operate the electricity market get every electricity generator to submit their bid, how much they are going to charge for electricity and whatever is the most expensive unit that goes on the grid that is what everybody gets paid and all of that goes on our bills.
“To make it worse, some of the generators will be in locations where there is grid congestion and then they get paid compensation off of our bills.
“Then we pay another generator to fill the gap, often owned by the same people.
“To give an idea about just how expensive this is, last week in just two days alone, our nation paid £46 million, just in two days.
“So far this year it is £550 million we have wasted doing this – that is why we have the most expensive bills in Europe.”
On the company’s website, the firm claims that “with zonal pricing, there would be a different wholesale electricity price in each area.”
They claim that doing so would lead to cheaper energy bills in every part of the country and see areas with plenty of renewable generation, like Scotland, enjoy some of the cheapest electricity in Europe.
Critics have argued that some areas of the country could see bills go up due to the fact they benefit from the current system of price setting.
Martin Pibworth, chief executive of SSE, believes that zonal energy pricing could hurt the UK energy sector in a number of ways.
He said: “At best it would create a distraction when we need laser focus on delivery, and at worst it could actively hinder the Government’s Clean Power Mission, and the benefits that would flow to communities across the UK.
“While the protracted zonal debate has already been damaging to the UK’s reputation for policy certainty, perhaps more alarmingly the case that has been made in its favour has been based on an outdated view of the electricity system – conveniently ignoring the high-profile programme of grid infrastructure projects being built as we speak that will transform the electricity system in Great Britain.”