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The UK energy market is undergoing a period of transformation, with discussions around Zonal Energy Pricing gaining momentum. This potential shift could redefine how electricity prices are set across different regions, impacting businesses, landlords, and property managers alike.
With grid decarbonisation accelerating and network constraints becoming more pronounced, a move away from uniform wholesale electricity pricing towards a zonal model could be on the horizon. But what does this mean for businesses, and how can they prepare for potential changes?
What is Zonal Energy Pricing?
Currently, electricity in the UK is priced on a national basis, meaning businesses pay a uniform wholesale rate regardless of their location. However, under a Zonal Energy Pricing model, electricity prices would vary by region, reflecting local supply and demand, network constraints, and generation mix.
Regions with high renewable generation and low demand may experience lower electricity prices, while areas with high demand and limited local generation could see costs rise. The approach aims to incentivise more efficient grid use, reduce system balancing costs, and encourage investment in generation where it is most needed.
Why is This Being Considered?
The UK energy system is evolving, with more intermittent renewables and decentralised generation coming online. As the grid transitions away from fossil fuels, balancing supply and demand across different regions is becoming more complex and costly.
Zonal pricing is already used in many European markets, helping to:
With network congestion and grid reinforcement costs rising, introducing zonal pricing is being explored as a way to optimise the system more effectively.
How Could This Impact Businesses?
The shift to Zonal Energy Pricing could have significant implications for commercial and industrial energy users, particularly those with operations in multiple locations. Key considerations include:
Businesses in regions with high renewable generation may benefit from lower costs, while those in high-demand areas with fewer local energy resources could see prices increase. Understanding the potential price zones will be crucial for managing energy budgets effectively.
Energy procurement may become more complex, with businesses needing to adapt purchasing strategies based on their location. Long-term Power Purchase Agreements (PPAs) with renewable generators in favourable zones could help secure stable pricing.
For landlords and property managers, differing energy costs across regions may influence tenant preferences and the financial viability of certain locations. Buildings in lower-cost energy zones could become more attractive to sustainability-conscious occupiers looking to reduce operational expenses.
Businesses with on-site solar, battery storage, or demand flexibility will be better positioned to manage pricing risks. Investing in energy efficiency and smart energy management technologies could help mitigate potential cost increases.
What Should Businesses Do Next?
While zonal pricing is still under discussion, businesses should start assessing how it could impact their operations. Actions to consider include:
How Inteb Can Support Your Business
At Inteb, we help businesses navigate the complexities of the evolving energy market. Whether it’s optimising procurement strategies, improving energy efficiency, or implementing on-site solutions, our team of experts is here to guide you.
If you’d like to discuss how potential changes to energy pricing could impact your business and explore strategies to stay ahead, contact us today.
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