Zonal pricing

 

Ocean winds was paid £72,000 not to generate power from its wind farms in the Moray Firth during a half-hour period on 3 June because the system was overloaded - one of a number of occasions output was restricted that day.

At the same time, 44 miles (70km) east of London, the Grain gas-fired power station on the Thames Estuary was paid £43,000 to provide more electricity.

Payments like that happen virtually every day. Seagreen, Scotland's largest wind farm, was paid £65 million last year to restrict its output 71% of the time, according to analysis by Octopus Energy. 

Balancing the grid in this way has already cost the country more than £500 million this year alone, the company's analysis shows. The total could reach almost £8bn a year by 2030, warns the National Electricity System Operator (NESO), the body in charge of the electricity network.

It's pushing up all our energy bills and calling into question the government's promise that net zero would end up delivering cheaper electricity.

Now, the government is considering a radical solution: instead of one big, national electricity market, there'll be a number of smaller regional markets, with the government gambling that this could make the system more efficient and deliver cheaper bills.

as long as prices continue to be set at a national level, the hold gas has on the cost of electricity will be hard to break. Less so with regional – or, in the jargon, "zonal" - pricing.

Think of Scotland, blessed with vast wind resources but just 5.5 million people. The argument goes that if prices were set locally, it wouldn't be necessary to pay wind farms to be turned down because there wasn't enough capacity in the cables to carry all the electricity into England. 

On a windy day like 3 June, they would have to sell that spare power to local people instead of into a national market. The theory is prices would fall dramatically – on some days Scottish customers might even get their electricity for free.

Other areas with lots of renewable power - such as Yorkshire and the North East, as well as parts of Wales - would stand to benefit too. And, as solar investment increases in Lincolnshire and other parts of the east of England, they could also see prices tumble.

All that cheap power could also transform the economics of industry. Supporters argue that it would attract energy-intensive businesses such as data centres, chemical companies and other manufacturing industries.

some of the hundreds of millions of pounds the system would save could be used to make sure no one pays more than they do now.

And those higher prices could also encourage investors to build new wind farms and solar plants closer to where the demand is. The argument is that would lower prices in the long run and bring another benefit - less electricity would need to be carried around the country, so we would need fewer new pylons, saving everyone money and meaning less clutter in the countryside.

Research commissioned by the company estimates the savings could top £55 billion by 2050 - which it claims could knock £50 to £100 a year off the average bill.