Business welcomes Government decision to scrap energy ‘zonal pricing’ plan

Business leaders have welcomed the Government’s decision to scrap plans for zonal energy pricing.

Under the ‘zonal pricing’ plans, different parts of England, Wales and Scotland would have been charged different rates for their electricity, based on local supply and demand.

It was intended to encourage heavy electricity users to relocate to areas that have more generation such as Scotland, where windfarms sometimes have to switch off because of a lack of demand.

But senior officials said earlier this week that the scheme could put off investors and make it more difficult to build renewables.

The energy department confirmed on Thursday it was abandoning the proposal after a lengthy consultation that had been running since 2022.

Ben Martin, policy manager at the British Chambers of Commerce, said: “We believe the government has made the right decision in ruling out zonal pricing. Its Clean Power Mission has the right ambition; to ensure that the UK’s electricity system can be decarbonised and made secure for the future.  

“But businesses had raised significant concerns about unintended consequences if zonal pricing had been introduced. These included the creation of a postcode lottery, uncertainty for businesses, and the impact it would have on investment in the UK.  

“The government has set out clear ambitions to reform the national pricing electricity market which can improve efficiency and bring certainty for investors.  

“But speed is of the essence and the priority must be to accelerate grid connectivity. Businesses across our Chamber Network have said this is a significant barrier to growth. Many are holding back on expanding their existing operations in the UK because of the long queues to get connected. 

“Firms are also facing some of the highest energy bills in Europe. Our research from last Autumn showed that 37 per cent of businesses said they would find it difficult to pay their energy bills.  

“We need government reform to relieve this pressure and stand ready to work with them to deliver an electricity system that is fit for the future.” 

Full details on the government’s proposals can be found here.