Ed Miliband’s Net Zero plans falling apart

Regional Electricity Pricing Will Wreck Miliband’s Net Zero Plans, Says Wind Farm Chief
SSE Chief Executive Warns Overhauling Power Market Risks ‘Political and Economic Disaster’

The ambitious net zero plans championed by Ed Miliband face potential derailment due to proposals to fragment Britain’s electricity pricing system into regional zones, according to one of the nation’s foremost wind farm developers.

Alistair Phillips-Davies, who serves as the chief executive of SSE, has issued a stark warning that restructuring the UK power market could precipitate a “political and economic disaster”, leading to increased household bills and imperilling vital investment in renewable energy initiatives. Most concerningly, he cautioned that millions of British households could find themselves subject to a “postcode lottery” regarding their energy costs.

The controversy emerges amid heated discussions within the energy sector concerning the Government’s proposed implementation of a zonal pricing market—a system whereby different regions across the country would operate with distinct electricity prices, determined by localised supply and demand dynamics.

Under the current framework, the UK maintains a unified national electricity price. However, critics of this system, including prominent energy supplier Octopus Energy, contend that this arrangement artificially inflates bills across the board, as grid operators must resort to costly interventions—such as compensating wind farms to cease operations at certain times—to maintain system balance.

Proponents of the zonal system present the argument that such an approach would create natural incentives for developers to construct wind and solar farms in closer proximity to centres of demand, particularly near industrial zones and urban areas. They maintain that this would significantly reduce the requirement for extensive cabling infrastructure, ultimately resulting in cost savings for consumers.

However, Phillips-Davies has emphasised that Miliband’s clean power initiative necessitates “post-war levels of infrastructure development and great feats of engineering”—all of which he believes would be fundamentally compromised should the Government proceed with the proposed reforms.

This warning coincides with the National Infrastructure Commission’s call for a substantial upgrade to the nation’s electricity distribution grids, anticipating a doubling of power demand by 2050. Government ministers have received advisement that investment requirements could reach as high as £50 billion.

In his contribution to The Telegraph, Phillips-Davies articulated his position: “The clean power prize represents a golden economic opportunity for Britain that is achievable without this costly distraction—don’t blow it now.”

The SSE chief executive further argued that the zonal reforms would require until at least 2032 for implementation, thereby potentially undermining the Energy Secretary’s stated ambition to achieve a clean power system by 2030. Phillips-Davies expressed particular concern that the policy would escalate the costs associated with the energy transition, as wind farm developers, including SSE, would need to pursue higher returns to offset the uncertainties introduced by zonal pricing.

To underscore his point, Phillips-Davies referenced SSE’s recent cancellation of plans to expand its Blairidh onshore wind farm, situated in Scotland’s Great Glen. He attributed this decision directly to the “risk premium” associated with zonal pricing, which rendered the project financially unviable.

The executive’s intervention highlights the complex predicament confronting Miliband regarding electricity market reform, with stakeholders on both sides of the debate warning of severe repercussions.

Miliband’s ambitious plan to transition the power grid to almost complete reliance on renewable energy by 2030 necessitates substantial new wind and solar capacity. However, these installations frequently need to be situated far from urban centres, requiring extensive new cable infrastructure to connect them to the grid.

Furthermore, congestion within the electricity transmission system—the vital network of cables that distributes power throughout the country—means that significant amounts of power generated by Scottish wind farms often cannot reach areas of highest demand in the south.

This situation compels grid operators to “balance” the system through measures such as shutting down Scottish wind farms whilst activating gas plants, batteries, or alternative generators in the south. Critics maintain that the national pricing system exacerbates these inefficiencies.

Advocates of zonal pricing assert that transitioning to a regional system would provide an immediate solution to these challenges. Greg Jackson, chief executive of Octopus Energy, has previously asserted that implementing a zonal system represents the only viable path for Miliband to deliver on Labour’s commitment to reduce domestic energy bills.

“The choice is clear: without system reform, bills increase; with reform, they decrease,” Jackson stated last month.

However, opponents, including SSE, advocate for increased government investment in grid upgrades and reforms that would address the peculiarities of the national pricing system without fragmenting it.

Phillips-Davies reinforced this position, stating: “Zonal pricing would not address the fundamental realities of energy infrastructure. Large-scale wind and solar farms simply cannot be constructed within urban centres.”

In a parallel development, the National Infrastructure Commission has called for investment ranging between £37 billion and £50 billion in Britain’s electricity distribution grids to accommodate the projected doubling of power demand by 2050. Such investment would translate to an additional £5 to £25 on annual household bills.

Nick Winser, one of the report’s authors and an electricity markets expert, argued that higher bills to fund infrastructure investment would prove more economical for consumers in the long term, as it would diminish the need for more expensive interventions to address grid congestion in the future.

In response to these developments, a government spokesperson stated: “In an increasingly unstable world, guaranteeing our energy security and protecting consumers from future energy price shocks can only be achieved through transitioning to home-grown power sources. We are currently evaluating reforms to Britain’s electricity market arrangements, ensuring these prioritise bill payer protection and encourage investment. We shall provide an update in due course.”