A report from FTI Consulting, commissioned by Octopus Energy, reveals zonal pricing could save £55 by 2050.

The UK currently operates under a single, nationwide electricity pricing system, resulting in some of the highest power prices in the world. Countries like Norway, Sweden, New Zealand, Japan, and much of the US have already adopted locational pricing, which adjusts electricity prices regionally based on local supply and demand. This allows for more efficient use of the grid, reducing unnecessary costs and inefficiencies.

If adopted, a zonal pricing system could save an average of £3.7bn a year, rising to as much as £5bn annually if there are delays to planned infrastructure: a significant increase in the savings estimated by Ofgem and FTI in 2023.

Additionally, Britain needs to build more than double the amount of power lines in the next five years than was built in the last decade. If just three out of eighty critical power lines aren’t built by 2030, the cost of wasted wind energy under the current energy system would rise to £7.8bn per year the National Energy System Operator estimates.

Greg Jackson, founder of Octopus Energy Group, said: “Either Britain sticks with an outdated pricing system that leaves consumers exposed to skyrocketing bills, or adopts zonal pricing and saves over £4bn a year.”

The report, Impact of a Potential Zonal Market Design in Great Britain from FTI Consulting, further notes that zonal pricing could lead to higher, and more geographically diversified, economic growth through lower prices.

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