Renewables firms rally against zonal pricing

​The letter, addressed to the Prime Minister and Scotland’s First Minister, marks a significant escalation of the industry’s lobbying to thwart “zonal pricing”, which its advocates claim would bring cheaper electricity to areas from which renewable power will be generated.

At present, the regulator Ofgem is carrying out a Review of Electricity Market Arrangements, which includes the option of zonal pricing. Its most prominent opponents have been SSE, Scottish Power and the trade body, Scottish Renewables.

The letter claims that zonal pricing “would hinder, or even potentially halt, investment by further compounding the barriers projects continue to face”.

In a supporting letter, Scottish Renewables said “investment could be halted and projects left unviable”. They describe zonal pricing as “a dangerous distraction which risks derailing these vital new developments”.

Asked by the Gazette if, given this scale of rhetoric, the issue represents an “existential threat” to Spiorad na Mara, the project director, Martin Whyte, said: “Whatever the Government decides will have implications for all renewable energy projects in Scotland and the UK.

“The Spiorad na Mara team has actively engaged government officials - both Scottish and UK - and the wider offshore wind industry for a long time, with a view to identifying constructive ways to address this issue. We believe a satisfactory solution will be found to enable Scotland to achieve its offshore wind ambitions, including delivery of Spiorad na Mara.”

However, the letter which Northland signed states: “The continued presence of zonal pricing on the table is already stalling investment in the UK amidst fierce global competition, with ripple effects being felt throughout the supply chains that we should be growing. The signatories to this letter stand with one voice in our call to the UK Government to urgently rule out zonal pricing at the earliest opportunity”.

The letter says that the creation of “tens of thousands of jobs” can only be achieved “by making Scotland and the UK more attractive for the significant levels of private investment required in the years ahead … That is why industry remains supportive of evolutionary reforms to improve, rather than radically disrupt, the electricity pricing system”.

In a counter-offensive, the most active advocates of zonal pricing, retailer Octopus Energy, have been circulating literature which claims that zonal pricing “would especially cut costs in Scotland and other areas with lots of renewable generation – in fact, it could take bills from some of the highest in Europe to some of the lowest.

At Holyrood last week, the Scottish Government’s Energy Minister, Gillian Martin, said “some of the arguments for zonal pricing are arguing a bit too much … I am sorry to sit on the fence on zonal pricing, but I need to understand an awful lot more about it and what the alternatives are”.