Two prominent battery storage companies in the UK have expressed their support for adopting regional electricity pricing amid concerns from some industry peers who believe such a transition might hinder investment opportunities.

Gresham House and Statera have conveyed to The Times that a zonal pricing approach could lower the operational costs of the UK’s energy infrastructure, facilitating the establishment of batteries in optimal locations to better manage excess wind power generation.

Ben Guest, the energy transition head at Gresham House, which operates the largest battery storage fleet in the UK, highlighted that zonal pricing is “an essential step for the UK’s electricity system”, aimed at directing investments where they are most necessary.

The UK government is anticipated to make a decision soon about potentially replacing the country’s standardized wholesale electricity pricing with a model encompassing around seven to twelve regional zones.

Under this proposed system, electricity prices would fluctuate on a regional basis, reflecting the supply and demand dynamics of each area. This would prevent wind farms located in remote regions from selling their electricity to consumers far away if adequate transmission infrastructure is lacking.

Currently, the National Electricity System Operator allocates hundreds of millions of pounds annually to manage transmission constraints, often compensating wind farms for disconnection while activating gas plants closer to demand areas.

Strategically placed batteries near wind farms could mitigate these issues by harvesting surplus energy during windy conditions and redistributing it during calmer periods, thereby stabilizing energy supplies. However, the national pricing system does not always reflect local conditions—batteries in Scotland might release energy based on high national prices even when local supply is excessive. A zonal pricing framework would help adjust regional prices appropriately, prompting batteries to store energy during periods of surplus.

The concept of zonal pricing has sparked considerable debate within the energy sector, with many wind farm operators and independent generators voicing opposition, while some consumer advocates and household suppliers show support.

Guest noted that Gresham’s findings suggest that “a well-structured zonal pricing system can decrease wholesale energy costs while minimizing the necessity for many planned upgrades to the electricity network and their accompanying infrastructure.”

He added that zonal pricing would “incentivize energy storage, whose costs have been declining rapidly, to collect renewable energy during periods of overproduction and distribute it during times of low generation when constraints do not impede flow across zones.

Tom Vernon, CEO of Statera Energy, which is currently developing the UK’s largest battery storage facility at Trafford Park in Greater Manchester, emphasized the importance of deploying batteries in strategic locations to cost-effectively balance the grid. Statera supports zonal pricing, arguing it will enhance power system transparency and yield clearer pricing signals for demand and generation efficiency. He expressed confidence that zonal pricing would ultimately result in lower costs.

Conversely, other notable battery storage companies have expressed their opposition to the shift. Harmony Energy voiced concerns about the risks associated with fundamental market changes that could destabilize investor confidence during a critical period for infrastructure development. Amit Gudka, CEO of Field, stated that zonal pricing might “slow down investment,” and emphasized that expanding the network should take precedence over “tinkering with the market.”

Zenobe, another key player in the battery storage arena, has reported that even the prospect of zonal pricing has already diminished investor confidence and is hindering battery expansions, as the intricacies and uncertainties of zonal pricing complicate power sale agreements.

A spokesperson for the Department for Energy Security and Net Zero reassured that they are contemplating reforms to Britain’s electricity market structures, prioritizing protections for consumers and encouraging investment, with further updates forthcoming.