Zonal Pricing Signals a Turning Point for UK Energy

Gresham backs reform, Harmony raises alarm as zonal tariffs spark a high-stakes energy rift.

4 Jun 2025

A proposal by the UK government to replace national electricity prices with regional tariffs has divided the battery storage industry, exposing differing views on how best to manage the power system as renewable generation expands.

Under the plan, electricity prices would vary by location to reflect local supply and demand. Ministers and officials argue that the current uniform pricing system masks regional constraints, leading to inefficient investment and higher overall system costs. The government has said the existing framework wastes billions of pounds a year and slows the rollout of low-carbon power.

Some battery developers support the change. Groups such as Gresham House and Statera Energy argue that zonal pricing would send clearer signals about where new storage and generation are most valuable, encouraging investment in areas that ease pressure on the grid.

“It’s a chance to build storage where it counts,” a Gresham spokesperson said. “Better price signals mean better decisions and better outcomes.”

Supporters say that batteries located closer to demand centres or renewable generation could help reduce congestion on transmission networks and lower costs for consumers over time.

Others in the sector have raised concerns. Harmony Energy and Zenobē have warned that regional pricing could make revenues more volatile and discourage investment in parts of the country with lower demand or weaker grid connections. They have also pointed to uncertainty over how zones would be defined and how existing assets would be treated during the transition.

Industry figures say that lack of clarity risks delaying projects at a time when the UK needs rapid expansion of flexibility to support wind and solar generation.

The debate comes as more dynamic pricing is already entering the market. Suppliers such as Octopus Energy offer tariffs that vary by time of day, encouraging consumers to shift usage away from peak periods. As battery systems become more common in homes and businesses, policymakers see a stronger case for prices that reflect both time and location.

The government has not yet set out a detailed timetable or final design for zonal pricing, and consultation is ongoing. Investors and developers say the eventual outcome will shape billions of pounds of infrastructure spending and influence whether the UK can maintain investment momentum while meeting rising electricity demand.

For now, the industry remains split over whether regional prices would deliver a more efficient system or introduce new risks into an already complex market.