NEWS UPDATE ZONAL PRICING


Government abandons regional electricity pricing proposals


IEA report reveals energy efficiency failings


After decades of regular improvements, gains in energy efficiency investment within the manufacturing industry have now completely stalled. According to a new report on competitiveness, issued by the International Energy Agency, its Energy Efficiency Progress Tracker reveals that during the first two decades of this century an average annual energy intensity progress of almost 2% was being achieved. But since 2019 this improvement figure has fallen to an average improvement of just 0.2% per year. Energy intensity is calculated by assessing the amount of energy needed to produce each unit of wealth. The IEA says that stagnation in industrial energy efficiency is the main reason behind the recent slowdown. However, since 2020, the average annual rate of progress in buildings and transport has also fallen (to around 1%). This dramatic slowdown comes at a time of increased policy ambition, to double the previous global rate of energy efficiency improvements by 2030, a policy endorsed by all signatories to the 2015 Paris Agreement on climate change, including the UK. The IEA is warning that failure


to improve energy efficiency has serious implications for the delivery of several other key policy goals: “Without a focus on improving progress in energy efficiency, these trends risk weakening firms’ competitiveness… and add pressure on energy systems, including electricity grids, that are straining to meet energy demands.” Overall demand for energy has been increasing during the 2020s by 1.8% per year, compared with an average increase of 1% during the previous decade. The industrial sector is now the “driving force responsible for 80% of the increase in global energy demand”.


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The UK government has scrapped plans for regional electricity pricing amid concerns it could deter investment in renewable energy and raise costs for some households. Following a consultation which started in 2022, it is thought that reforming the system while retaining a single national wholesale price is the right way to deliver a fair, affordable, secure and efficient electricity system. Zonal pricing would have introduced


different wholesale electricity prices across the country, potentially making power cheaper in Scotland but more expensive in the south of England. It aims to reflect local supply and demand more accurately and reduce the need to pay wind farms to shut down when the grid is overloaded. Supporters, including Octopus Energy boss Greg Jackson, argued it could lower overall costs and reduce the need for expensive grid upgrades. The National Energy System Operator also


backed the proposal. However, major energy firms including SSE and Scottish Power, warned the change could undermine investment and lead to unpredictable pricing. Critics also raised concerns about regional disparities, with households in some areas potentially paying hundreds of pounds more. The government’s latest proposals


have been designed to ensure the benefits of clean power are felt


by consumers in every part of the country, while giving businesses the stability and certainty they need to continue investing to upgrade the national infrastructure. Trevor Hutchings, chief executive


of the Renewable Energy Association, comments: “Reform is essential, but we know from our own membership that there are strong views on either side of the debate, and that any change can create winners and losers. However, it is uncertainty that dents investor confidence and I am pleased we now have further clarity.” Speaking on behalf of the GMB


Union, national secretary Andy Prendergast questioned the length of the consultation process: “The decision not to proceed with zonal pricing is long overdue and gives much-needed clarity for industries and businesses. It’s rare to find a proposal uniting so many different people – from unions to businesses and charities – against it. The consultation period has been disruptive and has delayed key investment decisions. Questions need to be asked as to why this process has taken so long to resolve.”


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Onshore wind strategy set to double capacity


The amount of clean, homegrown energy from onshore wind is set to accelerate over the second half of the decade as the UK government launches its Onshore Wind Strategy. As well as supporting up to 45,000 skilled jobs, the government says that its plans will help to generate 27-29GW of onshore wind by 2030, almost doubling the country’s current onshore wind capacity by the end of the decade. The strategy sets out over 40 actions to get


onshore wind building again across the UK, including the repowering of old turbines and unlocking up to 10GW of onshore wind by resolving issues with how onshore wind turbines and aerospace civil and defence infrastructure co-exist. On announcing the strategy, Energy Minister


Michael Shanks said: “Rolling out more onshore wind is a no-brainer – it’s one of our cheapest technologies, quick to build, supports thousands of skilled jobs and can provide clean energy directly to the communities hosting it. After years of decline, we’re giving industry the tools to get building again, backing industrial renewal and secure, clean, homegrown energy through our Plan for Change.” The measures outlined are designed to increase


confidence among investors and developers, thereby attracting more private capital. The strategy also sets out how people living near onshore wind farms will see tailor-made community benefits through an updated Community Benefit Protocol for England, to support and improve the lives of those living in areas hosting onshore wind.


EIBI | JULY / AUGUST 2025


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