Spanish energy giant Iberdrola has urged Shadow Chancellor Rachel Reeves to reconsider her party’s plans to introduce regional electricity pricing, arguing it could jeopardise billions of pounds of investment in British wind farms.
The proposal, championed by Ed Miliband, the Energy Secretary, would replace the national electricity price with a series of regional tariffs determined by local supply and demand.
In a letter to the Chancellor, Ignacio Galán, Iberdrola’s chairman and owner of Scottish Power, warned that so-called “zonal pricing” risked prolonging uncertainty and inflating project costs. He underlined the company’s existing pledge of £24 billion in UK investment—a figure announced at an investment summit last year alongside Sir Keir Starmer. Although Iberdrola sources have “categorically” denied any immediate threat to withdraw these funds, Mr Galán has made it clear that major reforms could undermine the group’s commitment if they create excessive volatility.
Wind power providers argue that regional pricing would introduce unwelcome complexities into their planning and financing. With Mr Miliband intent on a near-total phase-out of gas-fired generation by 2030, they say any shake-up that heightens financial risk could slow the pace of renewable projects. Major developers, including SSE, claim such reforms would result in a “postcode lottery” for energy bills, potentially charging higher rates to households in densely populated areas where transmission constraints are more acute.
Supporters of regional pricing, however, dismiss these concerns, insisting that companies oppose the policy purely to protect their profits. At present, wind farm operators receive significant “constraint” payments if they must stop generating when the grid becomes overloaded. Zonal pricing would abolish these payouts—shifting instead to lower tariffs for households and businesses in areas of wind surpluses, thus incentivising consumption when clean power abounds.
Greg Jackson, chief executive of Octopus Energy, has championed the reforms, pointing out that wind farm developers already operate in countries with similar systems. He believes adopting regional pricing is essential to driving down electricity bills, adding: “We waste billions of pounds switching off wind farms on windy days. Ending that inefficiency helps everyone.”
Uncertainty over policy direction ahead of the next round of renewable subsidy auctions has prompted concern among large developers. One industry executive said: “Bidding opens in July, yet we don’t know how many zones there might be or what the model will look like. So it’s impossible to calculate risk properly.”
A government spokesman defended the proposals in principle, saying that any reforms aim to “protect bill-payers and encourage investment”. Yet opponents remain unconvinced. They argue that pressing ahead with zonal pricing will not only deter vital investment in low-carbon infrastructure but also risk damaging the UK’s broader ambition to become a leader in green energy.
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Scottish Power owner urges Labour to scrap Miliband’s ‘zonal pricing’ plan