Zonal pricing is a way of running a wholesale electricity market in which the country is divided into several zones, each with its own price. Where generation is plentiful but the grid cannot carry it all away, prices fall; where power is scarce, they rise. Countries including Sweden, Norway and Italy use versions of it.
Why it was considered for Great Britain
Great Britain has one national wholesale price, even though much of its wind power is in Scotland and much of its demand is in the south of England. When transmission lines between them are full, NESO pays some generators in the north to switch off and others in the south to switch on. These constraint costs are added to bills. Supporters of zonal pricing argued that local prices would encourage new generation, storage and demand to locate where the grid can use it, reducing those costs.
The idea was examined in the government’s Review of Electricity Market Arrangements (REMA), launched in 2022.
The 2025 decision
On 10 July 2025 the government announced that Great Britain would keep a single national wholesale price and would not introduce zonal pricing. It cited the risk that a change would raise the cost of investment and delay new projects, and the wish to avoid regional differences in wholesale prices.
Instead it chose reformed national pricing: a package of measures intended to give better signals about where to build, and to make the system cheaper to operate, without splitting the market. Its main elements include:
- a Strategic Spatial Energy Plan, setting out where generation, storage and networks should go;
- reform of transmission network charges;
- changes to how grid constraints are managed and to balancing and settlement.
A delivery plan for reformed national pricing was published on 21 April 2026, later than first intended, together with a consultation on the siting and investment measures that closed on 2 June 2026.
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