Zonal Pricing Rejected: UK Stays with Single Electricity Market
The UK government has confirmed it will retain a single national electricity wholesale price, rejecting proposals to divide the country into regional pricing zones—a move that had been under serious consideration and was supported by some prominent voices in the energy sector.
Earlier this year, Ofgem’s chief executive, Jonathan Brearley, publicly stated that “zonal pricing is the best way forward,” following internal debate within the regulator. While this was not an official Ofgem position, Brearley’s comments echoed the views of others such as Greg Jackson, founder of Octopus Energy, who argued zonal pricing would better reflect the cost of supplying electricity in different parts of the country.
However, the idea proved divisive among those supportive of the UK’s net zero transition, with major energy firms like RWE, Solar Energy UK, and ScottishPower opposing zonal pricing on grounds it could disrupt investment and undermine energy market stability. Following two years of consultation, the government concluded that retaining national pricing while reforming the system is the most effective way to ensure affordability, energy security, and a strong environment for clean energy investment.
Strategic Reform to Enable Clean Power Growth
Instead of regional price zones, ministers will introduce a Strategic Spatial Energy Plan in 2025 to guide where clean energy projects should be built. This long-term planning framework—led by the new National Energy System Operator (NESO)—will cover development across land and sea through 2050, aiming to reduce grid delays, lower connection costs, and steer investor decisions with greater clarity.
Energy Secretary Ed Miliband said the choice was about protecting families from global fossil fuel volatility while maintaining stable conditions for investors. “As we embark on this new era of clean electricity, a reformed system of national pricing is the best way to deliver an electricity system that is fairer, more affordable, and more secure,” he said.
Grid Upgrades and Transmission Reform
A major focus of the reforms is to fix grid inefficiencies that have led to rising constraint payments, when power can’t reach demand centers due to bottlenecks. NESO estimates up to £4 billion in constraint costs could be avoided by 2030 if network upgrades proceed on schedule. Key projects—like the Norwich to Tilbury line and Sea Link offshore cable—are already in development.
The government will also work with Ofgem to review transmission charges that penalize generators for location. These charges can vary year to year, creating uncertainty. Proposed changes aim to reduce this volatility, guiding generation where it’s needed most and supporting long-term investment.
Broader Reform Package and Next Steps
The full set of electricity market reforms includes a national pricing delivery plan, reforms to planning rules, faster grid connections, and the use of smaller flexible assets—such as battery storage—to reduce strain on the network. Many of these changes are framed as part of the UK’s Clean Power by 2030 mission, which includes major investments in renewables and nuclear, including £14.2 billion for Sizewell C.
A Reformed National Pricing Delivery Plan will be published later this year to coordinate next steps between government, NESO, Ofgem, and industry.
Reaction to the decision has been mixed, with some welcoming the national price for its stability, while others argue it entrenches regional inequalities and weakens the signals needed to lower long-term grid costs.