THE industrial investment Sweden has attracted through introducing zonal energy pricing shows how much the Scottish economy could benefit from a transformation in the UK's market, an Octopus Energy chief has said.
Speaking to The National, Rachel Fletcher – the director of regulation at Octopus Energy – said Sweden had attracted more than €70 billion of industrial investment since making the switch to the zonal model.
Like Scotland, there is an abundance of renewables in the north of Sweden, where low electricity prices are now enticing industry to move to the region.
Fletcher told The National: “I think there is a strong case [for zonal pricing] for Scottish customers in terms of more access to low or negative electricity periods, but there’s also massive opportunity to attract industry into Scotland.
“Sweden, for example, has got zonal pricing and it’s got a similar situation where the north has got abundant renewables.
“On the back of the very low electricity prices that are now properly reflected in the zonal market, they’ve attracted over €70bn worth of industrial investment.
“If you’re a data centre, if you’re a green steel producer, if you’re a hydrogen producer, there’s so many electricity-intensive users who will hunt around for the cheapest power and go there.”
Fletcher also told The National zonal pricing would give Scotland the “cheapest electricity in Europe” which could, at times, be free to consumers.
She stressed Scots were getting the “raw end of the deal” in the UK’s outdated energy market, which she has insisted could turn into a “national scandal” in the years to come because of wind farms being paid to turn off, or “constrained”.
It costs money to move electricity from where it is produced to where it is needed. Under the current market, if an offshore wind farm in Scotland produces more electricity than the network can handle it is paid to turn off, or ‘constrained’ and a gas-fired power plant in the south of England is paid to turn on.
The constraint costs – which are collected from consumers – are huge and in 2022/23 they amounted to £1.5bn and are projected to rise to £3.7bn by 2030, something Octopus considers a “staggering waste of electricity”.
Zonal pricing would split the UK up into several different geographical zones which each having a different price based on its level of supply and demand. Energy consumers would pay less for electricity if they are based close to electricity projects but more if they are based further away, meaning Scotland – with its abundance of renewables – would benefit enormously.
Greg Jackson, CEO of Octopus Energy, said earlier this year zonal pricing would increase demand in regions where energy is cheap. Data centres and heavy industry would move to these regions, which is what is happening in Sweden.
Jackson said in March: “By system reform what we can do is make sure that we’re not paying generators to turn off, we’re actually paying them for the electricity they produce at lower prices than we’ve ever had before and we’re able to use it.”
“If you change the price, you get more demand in the regions it’s cheap. Things like data centres or heavy industries will usually move there.
“This is what they do in Scandinavia and they’ve seen huge success. Scotland, parts of England, Wales, would have some of the cheapest electricity in Europe.”
