Power Grid

12 Mar 2024

Britain Proposes Location-Based Pricing for Electricity

12 Mar 2024  by reuters   

Electricity pylons are seen behind a local house in Dungeness, Britain, October 8, 2023. REUTERS/Carlos Jasso/File Photo Purchase Licensing Rights

Britain is proposing a location-based method to determine how much consumers should be charged for the electricity they use, the government said on Tuesday.

Britain plans to reform its electricity markets to ensure they spur investment in clean power production to help meet climate targets and lower costs for consumers.

Currently, wholesale electricity prices are set on a national level but under the new zonal market proposal consumers would pay different rates depending on where they are located with those close to power generators likely to pay less.

“A significant proportion of our energy is located away from areas of high demand ... Different wholesale prices could better match supply and demand and bring down costs for people across the country,” the Department for Energy Security and Net Zero (DESNZ) said in a statement.

Zonal electricity pricing is already used in some European countries such as Italy, Sweden and Norway.

DESNZ also said gas plants will be needed to ensure the country's energy security beyond 2030 with energy minister Claire Coutinho expected to later on Tuesday set out a new strategy for gas in a speech to be delivered at Chatham House in London.

“Without gas backing up renewables, we face the genuine prospect of blackouts ... We will not let ourselves be put in that position. And so, as we continue to move towards clean energy, we must be realistic,” she is expected to say.

The gas strategy is expected to broaden existing laws requiring new gas plants to be able to convert to low carbon alternatives in the future, such as hydrogen, or use carbon capture technology to capture emissions.

The announcements are part of a consultation into the Review of Electricity Market Arrangements (REMA) which was launched in 2022 to help meet net zero goals and reduce costs after Russia’s invasion of Ukraine led to record high electricity prices.


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