A new report from the University of Aberdeen has delivered a stark warning to policymakers: ditch plans for zonal pricing and focus instead on national market reform and grid upgrades or risk derailing the net zero goal.
The study, Should Zonal Pricing be introduced in the UK?, co-authored by Professor John Underhill and independent analyst Matthew Porter, says the proposed regional pricing system would inject investment uncertainty and raise costs for consumers.
Zonal pricing – where power costs reflect local supply and demand – has been touted as a way to reward areas rich in renewables, such as Scotland. But the Aberdeen team says the move would be a step backwards, not forwards.
“The UK now has a challenging objective: to rewire the country and deliver an expanded electricity grid fit for a renewable future,” said Professor Underhill. “This is not the time to disrupt grid architecture or market structure.”
Their conclusion? The risks far outweigh the potential benefits.
Under zonal pricing, project developers would face volatile and unpredictable revenues. Raising finance – whether debt or equity – would become harder and more expensive. In the end, consumers would bear the cost.
The report says the government’s REMA process should rule out zonal pricing entirely and instead double down on reforming the current national pricing system.
That, paired with a rapid scale-up in grid investment, would do more to unlock clean energy projects and hit Net Zero targets.
“A changing mix of generation types will inevitably require fresh investment in infrastructure,” said Porter. “Ensuring an investment landscape attractive to this new capital will require stable and predictable forecasts of revenues and costs.”
The study underscores a key message – policy stability is vital if the UK wants to become a clean energy superpower.
Introducing zonal pricing, it argues, would do the opposite: inject confusion, raise financing barriers, and risk delaying progress just as the pace of delivery needs to accelerate.
