The UK Government has been considering what has become a controversial and contested change to the way electricity is priced in Great Britain, from a national system to a more localised one. ‘Zonal pricing’, in simple terms, allows different wholesale electricity prices to exist between regions where more or less electricity, particularly wind energy, might be generated. This potential division of Great Britain into regions (see Figure 1 as an example) will in practice mean that areas that generate more electricity, particularly regions in Scotland, will see greater wholesale electricity price reductions than their English and Welsh counterparts. While much of the discussion about the merits, and indeed drawbacks, of zonal pricing have been technical in nature and focused on the financial elements of any change, little examination has been made of social and equity perspectives of zonal pricing.
Figure 1. Example division of zones such as those used in LCPDelta Locational Pricing Study. Map used with permission from LCPDelta (2025).
From a technical and financial perspective, certain well-known backers of the proposed change, such as Octopus Energy, argued that zonal pricing is “a more efficient system […] to suit the clean energy sources and complex, smart energy users”, “save everyone upward of £3.7 billion on energy bills every year”, and “cut system carbon emissions by 17%”. Shifting to a zonal pricing system had also received past support by the energy regulator Ofgem and the energy system operator NESO.
So far, so good. That said, recent modelling from researchers at the UK Energy Research Centre found that “implementing zonal pricing before resolving transmission uncertainties risks “putting the cart before the horse””. The authors argued that by not first upgrading the already creaking national grid ahead of implementing a zonal pricing strategy, the UK risks increasing strike prices in upcoming Contracts for Difference (CfD) auctions by £20 per MWh which could result in a £3 billion uplift in consumer costs. Opponents also voice more location-specific concerns, particularly that regionally variable pricing may lead to increases in household energy bills for certain parts of the country. Analysis from LCPDelta found this could be particularly acute in the South East of England (see Figure 2). This said, the exact impact of this change on energy bills depends heavily on policy decisions, with Energy Secretary Ed Miliband previously ruling out implementing zonal pricing if it was forecast to result in increased household energy costs before his decision to drop the idea of zonal pricing altogether. Large energy incumbents, renewable energy developers and unions have also not been supportive of the proposed change.
Figure 2. Projection of the average difference between zonal and national wholesale prices between regions defined in Figure 1 in 2035. Graph used with permission from LCP Delta (2025).
When considering public opinion on the topic, the concern about regionally variable energy bill pricing and fairness is borne out in recent polling. In a survey of over 3,000 respondents from England and Wales commissioned by RenewableUK, Opinium Research found that 58.9% thought it was unfair to divide the UK into different electricity price zones, with a net support of 14.4% for any zonal pricing plan. While the question wording might be instructive as to the view of the organisations running the poll, the clear answers underscore a political roadblock to the success of implementing zonal pricing.
Additional to public support, zonal pricing raises questions in terms of equity: namely, who is benefiting from any proposed changes, and to what extent. As seen in Figure 1, different parts of Great Britain, particularly Scotland, stand to gain more than other parts of the island, especially the South East of England. Arguments for location-based reductions in electricity costs raise questions about how benefits are distributed, which remain unanswered. Would this approach lead to large-scale energy bill savings for all consumers, or those in particular regions regardless of household wealth? A location-based change in household energy bills could risk entrenching existing inequalities, as those on high incomes in certain regions may benefit more than households on lower incomes in others. There is also scant discussion around equitable distribution of infrastructure and associated upgrades that could entrench already existing inequalities. At the same time, we mustn’t forget that that some of the communities that were set to benefit from zonal pricing, such as those in the north of Scotland and Shetland, have some of the highest rates of energy poverty across the UK. Finding ways to address this must be sought. It must not, however, come at the expense of other parts of the country also struggling with high rates of energy poverty.
In recent days, it has been reported that the UK government has now scrapped the plan to introduce zonal pricing. Perhaps the arguments and debates about the merits of zonal pricing have been moot. Perhaps they also offer a window into the potential future of other Net Zero policies which may trigger equity-related questions about who benefits, to what extent, and where, and with what kind of trade-offs.
The debate around zonal pricing was not without its merits, with pressing and real problems that need addressing. While this proposed solution, in the end, had specific disadvantages and could have led to equity issues, it does not deter from the fact that inaction is not an option. Instead of radical market reform, such as the introduction of price zones, local or community-focused interventions could better ensure that electricity cost issues in certain parts of the country are addressed, instead of being passed on to other locations.
In general, public support or opposition will continue to guide Government strategy on the energy transition. This, as well as the inclusion of equity concerns, may result in less optimal pathways towards a decarbonised energy system while supporting a just and equitable transition. The example of zonal pricing has shown that careful consideration and inclusion of the public in energy system decision-making is therefore necessary, and requires greater attention moving forwards.
