New analysis from FTI Consulting, commissioned by Octopus Energy, shows that reforming the market by adopting zonal pricing could prevent the construction of nearly 3,000km of unnecessary pylons – almost three times the length of the UK – and deliver up to £27 billion in savings for bill payers*.
FTI compared the impact of national and zonal pricing systems on five major intra-GB transmission lines. Under national pricing, all five lines were worth the investment.
However, applying zonal pricing significantly decreased the payback on these power lines by between 22% and 95%, with two power lines becoming uneconomical, making them unnecessary.
This is because zonal pricing optimises the use of existing grid infrastructure, reducing the need for new power lines and associated costs.
The report recommends reassessing post-2030 grid plans totalling £58 billion to avoid gold-plating the system with wires Britain neither needs nor can afford.
Zonal pricing has been shown to save at least £55 billion on energy bills and up to £27 billion in unnecessary grid build.
In contrast, retaining the national pricing system locks in higher costs for bill payers, with constraint payments forecast to remain between £2bn and £5bn a year from 2030 onwards, potentially soaring up to £8bn if there are minor grid delays**.
This comes alongside a projected £80+ billion*** in transmission expenditure by 2031 alone.
Greg Jackson, Founder of Octopus Energy Group, said: “Britain needs more infrastructure – but investments must be smart and efficient otherwise they’re not investment, they’re waste. Zonal pricing removes the need for tens of thousands of pylons, saving £27 billion
“Reducing the number of new pylons we need would not only save enormous amounts of money, but help maintain public support for clean energy.
“We shouldn’t let a handful of highly profitable giants, with the most powerful lobbyists, block these efficiencies and keep an increasingly expensive, broken system in place.
“Zonal pricing is not difficult – it’s the proven way to keep costs down and is the norm across much of the OECD. The longer the UK stays an outlier, the more British citizens will pay the price and the less competitive our industry will be.”
Zonal pricing is supported by Octopus, Ovo, The National Energy System Operator, Citizens Advice, The House of Lords Industry and Regulators Committee, The Social Market Foundation, The Resolution Foundation, The Energy Systems Catapult, Jonathan Brearley (Ofgem CEO), The Regulatory Assistance Project, Tech UK, E3G, Britain Remade, The Association for Decentralised Energy, Gresham House, and Statera Energy, among many others.
