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ScottishPower boss: Regional pricing proposals could slow UK energy investment
17 September 2024, 16:24
Keith Anderson’s comments come after a Government consultation suggested regional pricing as a key potential reform earlier this year.
The chief executive of ScottishPower has urged the Government against a proposed reform of the energy industry which could see the price of electricity set differently across the country.
Keith Anderson said that while a regional pricing model “makes sense” in theory, it risked deterring and slowing investment in the UK’s energy industry at a key time in the green transition.
He told the PA news agency: “If you propose something really radical, the risk you run is that you delay investment. You slow the process down.
“If you start a conversation now to say you’re going to bring in zonal pricing – even in five years – people will say, ‘Hang on. Explain to me exactly how it’s going to work.’”
Regional pricing was a leading proposal in a major consultation carried out under the last Government, the Review of Electricity Market Arrangements (Rema).
The system, which has gathered momentum among some industry bosses in recent months, would see people living near wind farms or other clean power projects pay less for electricity.
Some experts think it would cut prices for everyone because it would make the transmission system more efficient.
A 2023 study for Ofgem by FTI Consulting claimed it could save bill payers £51 billion by 2040.
The wholesale energy market is currently based on a national pricing system.
Industry figures are increasingly looking for ways to change how the market works, following a period of sharp price hikes to consumer bills driven by the soaring cost of gas in recent years.
Greg Jackson, the boss of rival Octopus Energy, described regional pricing as “the critical thing we need to do” in a recent interview.
But Mr Anderson said that while the reform would be “quite sensible” in a stable environment, the UK is part way through revamping the energy system towards clean power.
He added: “Trying to radically change the wholesale power system … it’s maybe not a great time to do it.”
Mr Anderson was speaking shortly after giving a speech at Energy UK’s annual conference.
At the same event, Net Zero Secretary Ed Miliband indicated that the Government would seek to maintain stability in its policymaking, though he did not address the prospect of regional pricing.
He said the starting point for the Government in trying to attract investors to the UK’s energy sector “has got to be: don’t change policy every five minutes”.
Mr Miliband said: “Uncertainty is the enemy of investing. If you have no sense of the strategic frame of the Government, and if you have no sense from one week to the next of whether it’s going to stick with that strategic frame, then how can you possibly, as an investor, have the confidence to invest?”