THE boss of a battery manufacturer based in Scotland has said he backs the concept of zonal pricing, as he spoke in defence of having differing prices across the UK.
Jonathan Marren, CEO of Invinity Energy Systems, told The National that while there will need to be ways to deal with initial uncertainty the policy could create for renewable investment, he is generally in favour of overhauling the market.
Zonal pricing would split the UK into price regions based on local supply and demand.
Energy consumers would pay less for electricity if they are based close to electricity projects but more if they are based further away, meaning Scotland – with its abundance of renewables – could benefit enormously.
Octopus Energy has said repeatedly that this system could give Scots some of the cheapest electricity prices in Europe.
At the moment, Britain has one national energy price even though at any point in the day the cost of producing electricity differs radically around 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.
The constraint costs – which are collected from consumers – are huge. In 2022/23 they amounted to £1.5 billion, and they are projected to rise to £3.7bn by 2030.
Octopus Energy argues that instead of wind farms being paid to turn off, Scots should be enjoying cheap or even free electricity.
The UK Government is currently deliberating whether to bring in zonal pricing, but Energy Secretary Ed Miliband said in April he would not split the country’s market into regions if it raises people’s bills in certain areas.
While Invinity Energy Systems chief Marren (below) said he could see how that would be politically challenging to justify, he said there was no issue with people’s bills being different across the country.
Asked if he supported zonal pricing, he told The National: “Conceptually, yes. It makes sense.
"The issue, at the moment, with zonal pricing is how do you forecast what the price will be in any given area?
“They are arguing it will actually cause a halt to investment in renewables until there is certainty as to what the various prices will be in these different areas. I think that is a valid argument.”
However, he added: “Fairness makes sense. Water bills are different in different parts of the country. Why should electricity be any different?
“I live down south and I am aware that is a choice of mine and therefore there might be consequences. My council tax will change if I choose to live in one borough rather than another.
“I think if you can bring prices down for all, I don’t think it has to be the same proportional amount for everybody and if you are in an area where you’ve got renewable generation taking place, then there should be a benefit for you living there.”
Invinity Energy Systems – based in Bathgate and Motherwell – produces vanadium flow batteries (VFBs) which are fully recyclable, non-flammable and are designed for long-duration energy storage, with operational lifespans exceeding 20 years – unlike lithium-ion batteries which last for much less time.
Marren explained that using more VFBs on the grid can bring down energy prices in the current market.
He said: “The constraint payments that are being paid at the moment to turn wind off are staggering.
“How do you take those constraint payments out? You either need to invest in the grid so you can transfer the wind from where it’s being produced to where it’s needed, and that’s a substantial investment.
“The alternative is you store the power when it’s being produced and release it back onto the grid when you haven’t got the constraints on the transmission lines and then be able to send it out, and that’s what battery storage does.
“You need a long-duration storage asset for that and our batteries will do eight to 12 hours without any concern, and so will allow those curtail payments to be reduced.”
In the current system, electricity prices are set by the most expensive source that needs to be “turned on” at any given time, which is usually gas.
But Marren explained how improved energy storage could help to change that.
“What happens now is because of the way our infrastructure is set up, effectively the clearing price for energy is set by gas generation and that’s quite expensive production, and therefore everyone is getting that price and that’s because you haven’t got storage to effectively compete with that gas asset,” he said.
“The more storage that’s on the grid, you can compete with that gas asset, and you’re then bringing the price down.”
