ED Miliband has reportedly ditched plans to introduce zonal pricing in the UK which would have given Scots cheaper electricity.
The Energy Security Secretary has allegedly decided not to proceed with the scheme that has been strongly backed by Octopus Energy, according to The Guardian.
Octopus Energy has repeatedly said such a scheme could give Scots some of the cheapest energy in Europe.
Zonal pricing would split the UK into regions based on local supply and demand, meaning Scotland would likely have benefitted enormously due to its abundance of renewables.
The proposals would have set lower electricity prices in areas where supply far outstrips demand, in an attempt to encourage industry to move into those areas and reduce the need to switch off generation.
One source told the paper: “The Government has been weighing this up carefully and concluded that the benefits of delivering the clean power mission at pace, particularly given the expected impact of imminent grid upgrades; the need to deliver on the coming renewables auctions; and the significant risk premium being attributed to the UK by international investors, would outweigh the purported benefits of zonal pricing – which at any rate would take beyond the next election to implement.”
While Octopus Energy backed the proposals for zonal, the scheme was opposed by the likes of SSE and Scottish Power who warned investors could be put off.
Scotland's biggest wind farm – Seagreen – is paid to not generate 71% of the time it could be. As a result, the effective cost of electricity it generates is four times higher than it should be.
The UK has one national energy price despite the cost of producing electricity differing throughout the day across the country.
If an offshore wind farm in Scotland produces more electricity than the network can handle it is paid to turn off, or be "constrained", and a gas-fired power plant in the south of England is paid to turn on.
Octopus Energy has recently launched a "wasted wind" tracker to show the public how much billpayers' money is being spent on turning off windfarms.
According to the energy provider, constraint costs have hit almost £700 million already this year.
Zonal pricing could have cut the cost of renewing and updating the country’s electricity grid by billions.
A report by FTI Consulting predicted overall savings of £52 billion for consumers over 20 years, while another, which was commissioned by Octopus, found the UK would need to spend £27bn less on major grid upgrades in the future.
However, the outgoing chief executive of SSE Alistair Phillips-Davies claimed recently the plan would be a “huge mistake”, saying it would create a “postcode lottery” where some households would pay £200 to £300 more because of where they live.
It is understood an official decision will be announced once it has been signed off by the cabinet.
The decision has reportedly gone to senior ministers in a process known as “write-round”, and will be announced before the next renewables auction which is scheduled for early August.
When approached for comment, the Department for Energy Security and Net Zero said: “We don’t comment on speculation.”
