It’s the new bit thing apparently. Instead of theone national ‘leccie price we have regional ones. This solves everything.
Now, I tend not to belive in omnisolutions. But I’m having a hard time grappling with this one. I simply don’t get it:
On top of this, congestion on the electricity transmission system – the cable superhighway that carries power up and down the country – means that a large amount of power generated by wind farms in Scotland often cannot get to where it is most needed in the south.
This forces grid operators to “balance” the system by shutting off wind farms in Scotland and firing up gas plants, batteries or other generators in the south. Critics say the national pricing system exacerbates the problem.
Zonal pricing advocates say switching to a regional system would fix these issues overnight. Greg Jackson, the boss of Octopus Energy, has previously claimed that switching to a zonal system is the only way Mr Miliband can hope to deliver Labour’s promise to cut domestic energy bills.
“If we don’t reform the system, bills go up. If we do reform it, they drive bills down,” he said last month.
OK, so we go to zonal pricing. ‘Leccie is generated, used, and priced by region. I do tend to think that smaller markets are less efficient – thus more costly – than larger. But, OK, maybe.
So, these vast wind farms off Scotland. Thety supply ‘leccie to bits of Scotland. There’s not much up there that uses ‘leccie. Big supply, small demand, low prices then. OK, well.
But that would then mean that those vast wind farms off Scotland are unviable. They’d not be getting enough to cover their costs from selling their oversupply of ‘leccie into that low demand at low prices.
Hmm. Now, the only way I can make this work is if the wind farms continue to get their high contracted (ie, CfD) prices while the market would only be willing to pay them piss. Which isn’t, in fact, a saving on ‘leccie bills at all. In fact, I think it would increase them. Still got to generate the extra power down south, the cheapo is limited to N Scotland and yet the windfarms are getting full whack as well?
So, anyone seen or know of a good explainer – including those details about CfDs and so on – about this idea for zonal pricing? Given that it’s being pushed by Octopus I assume it’s a rip off but it would be nice to know.
Update – have now found Ofgem’s 130 page report. We’ll see, eh?
The post I’m not grasping this idea about zonal pricing first appeared on Tim Worstall.
