Scotland could have 'cheapest electricity in Europe', Octopus Energy chief says

On Tuesday, UK Energy Secretary Claire Coutinho set out proposed measures to switch to zonal pricing for electricity.

Under a zonal pricing system consumers would pay less for their electricity the closer they live to the infrastructure generating it, such as windfarms.

Speaking about the proposed changes on Radio 4, Octopus Energy chief executive Greg Jackson said zonal pricing would help attract businesses to Scotland where the energy is cheapest.

“Today we’ve got this crazy electricity market where the price of electricity is usually set by gas [prices],” he said.

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“You’ve got a single national price. For example, there’s a ten-year moratorium on building data centres to the west of London.

“But, if we could use that cheap renewable power in Scotland to give cheap electricity to data centres, they’d leave the queue here [in London], reducing the demand for power in the southeast and moving it to where it’s plentiful.

“So, by system reform what we can do is make sure that we’re not paying generators to turn off, we’re actually paying them for the electricity they produce at lower prices than we’ve ever had before and we’re able to use it.”

When asked by the presenter if people would have to accept that some customers pay more for their energy bills depending on where they live, Jackson said zonal pricing would benefit all consumers.

“Zonal pricing reduces waste dramatically,” he said.

“Everyone’s bills go down. Last year, we spent £3 billion pounds – and the year before £4 billion – turning off windfarms when it’s windy, paying people to not generate, because we couldn’t shift the electricity to where the demand was.

“If you change the price, you get more demand in the regions it’s cheap. Things like data centres or heavy industries will usually move there.

“This is what they do in Scandinavia and they’ve seen huge success. Scotland, parts of England, Wales, would have some of the cheapest electricity in Europe.

“And you’d see industry coming back that’s been leaving these shores.”

However, Jackson was pressed once again about whether “customers in London and the south of England would have to accept that they’re paying more than those parts of Wales and Scotland that you’re talking about?”

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The energy boss said the system was already unfair to Scottish consumers and that zonal pricing would help rebalance the market.

“Today, isn’t it crazy that Scotland and poorer parts of England and Wales have got the highest standing charges?

“So, they generate the most electricity [but] they don’t benefit from that. They pay the highest standing charges.

“Meanwhile, even in the southeast of England, zonal pricing would reduce costs and it would attract investment like batteries to help make the most of electricity in those tougher regions.

“Imagine if we tried to make rents fairer by raising the cost of rent in every part of the UK to the same as London? Because that’s what we’ve done with electricity”.

A consultation on the UK Government’s proposals for zonal pricing is open until May 7.

According to Coutinho, ministers are currently consulting with experts on how many zones the UK would be divided into under the new system.

The minimum would be two – north and south – but there are also options to have seven or more zones.