Zonal Pricing Impacts on Electricity Costs

This report examines the impacts of zonal pricing on wholesale electricity prices in Great Britain, focusing on the implications for consumers and the overall system. It outlines the context of the UK Government's Review of Electricity Market Arrangements (REMA) and the consideration of moving from a national pricing system to a zonal pricing model. The report details previous analyses conducted by LCP Delta and their findings regarding the economic impacts of such a transition. It emphasizes that under zonal pricing, average wholesale prices will vary regionally, with most areas experiencing higher prices compared to the current national pricing model. The report also discusses the complexities involved in understanding the benefits of zonal pricing, including the effects of congestion rents and investment costs. It highlights that while some regions may benefit, the majority of consumers could face increased costs, particularly in the context of gas price fluctuations. The analysis aims to provide a comprehensive understanding of the potential changes in system and consumer costs associated with zonal pricing.