- British customers could save up to £74bn by 2050 on electricity bills if zonal pricing was adopted
- Octopus Energy is calling on the government to update outdated infrastructure
- Energy bills will rise £6.4% from 1st April
British customers could save up to £74bn by 2050 on electricity bills if the UK government adopted zonal pricing, according to a new report by FTI Consulting and commissioned by Octopus Energy.
The UK currently operates under a single, nationwide electricity pricing system, which Greg Jackon, founder of Octopus Energy group said is a legacy of the fossil fuel era and is no longer “fit for purpose”. This means the UK is paying some of the highest power prices in the world.
Octopus is calling on the government to adopt zonal pricing.
“Zonal unlocks massive savings by encouraging energy to be used nearer to where it’s produced and at those times it is plentiful, rather than wasted,” Jackson said.
“With the potential to ease any burdens in infrastructure delays, the government can embrace a modern system that delivers cheaper, fairer energy while also protecting us from shocks further down the line. The evidence is overwhelming – zonal pricing is the way forward and we need action now.”
Last week, Ofgem announced the Energy Price Cap would increase by 6.4% or £111 a year for the typical dual household from April to July. Early predictions suggest that there will be another increase in July, leaving households concerned about bills.
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. Jackson says this allows for more efficient use of the grid, reducing unnecessary costs and inefficiencies.
The report found that zonal pricing could save UK consumers £3.7bn a year from their energy bills, rising to as much as £5bn annually if there were delays to planned infrastructure work.
“This is a significant increase in the bill savings estimated by Ofgem and FTI in 2023, with potential for further benefits in customers from delays to new infrastructure,” Jackson said.
Zonal pricing could mean fewer pylons cluttering up the country and create economic growth potential in areas, such as Scotland, where new energy-intensive industries could locate and benefit from some of Europe’s cheapest electricity.
Jackson continued: “With consumers facing rising energy costs, the UK has a major opportunity to explore zonal pricing as a way to deliver a cheaper, more resilient, and lower-carbon electricity system.
“But either Britain sticks with an outdated pricing system that leaves consumers exposed to skyrocketing bills, or adopts zonal pricing and saves more than £4bn a year.
