UK Industries urge government to abandon zonal pricing proposal

A coalition of the UK’s energy-intensive industries, including representatives from the steel, glass, ceramics, unions, and renewable sectors, has urged the government to abandon the proposed zonal pricing model under the Review of Electricity Market Arrangements (REMA). The group, in a letter addressed to Secretaries of State Ed Miliband and Jonathan Reynolds, emphasized the need for a “secure, competitive, and low-carbon electricity system” to support industrial investment and decarbonisation.

The letter, undersigned by major industry groups such as UK Steel, British Glass, Ceramics UK, the Community Trade Union, Renewable UK, and the Global Infrastructure Investor Association, warned that the continued consideration of zonal pricing poses a "significant risk" to achieving the UK’s industrial and environmental goals.

Concerns Over Zonal Pricing

The zonal pricing model, which would split the UK electricity market into regional price zones, is intended to improve market efficiency. However, industry representatives argue that this model could lead to higher electricity costs in key industrial regions, including Yorkshire and South Wales, where demand is high, but local renewable generation remains limited. The letter states: *"Competitive electricity prices are absolutely essential for the steel industry to survive within a highly competitive global market. The Government has yet to demonstrate that zonal pricing will not harm energy-intensive industries."

The signatories argue that the model would exacerbate existing cost pressures and undermine the competitiveness of domestic production, particularly as international competitors benefit from more favourable industrial energy pricing.

Call for a Reformed National Market

Instead of zonal pricing, the coalition is advocating for a “Reformed National Market” approach. They suggest reforms to transmission network charges, system balancing, and strategic energy network delivery as a better path to achieving the UK’s clean energy and industrial ambitions.

Still, the signatories reaffirmed their commitment to supporting the government’s Clean Power Mission and Growth Missions but stressed the urgency of clarity on the electricity market framework to avoid deterring investments in the UK’s industrial heartlands.

Source: UK Steel, Photo: Fotolia