Households in Scotland could get cheaper electricity than those in the south as the UK Government launches plans for the 'biggest electricity market reform in a generation'.
Ministers are consulting on a series of proposals to improve energy security and cut costs for consumers in the long term, including a model that would see prices set locally - based on the amount of electricity being generated in that area - rather than nationally.
This would mean mean lower bills for those living near wind farms, which are primarily located in Scotland and northern England.
The Review of Electricity Market Arrangements (REMA) will seek views on a wide range of options to address the combined challenges of responding to higher global energy costs, the need to further boost energy security and move the UK to a cleaner energy system.
Launching the review yesterday, the government said the UK’s exposure to volatile global gas markets and energy costs for consumers could be radically reduced in the long term.
The plans include introducing incentives for consumers to draw energy from the grid at cheaper rates when demand is low or it’s particularly sunny and windy, saving households money, and splitting the wholesale market so that expensive gas-fired power generation no longer sets the price for renewables with cheap running costs.
One of the most radical proposals is a shift to “locational wholesale pricing”, whereby electricity prices would fluctuate throughout the day at potentially hundreds of areas around the country, depending upon the availability of power supplies in that part of the network.
“Prices that vary by time of day and location have the potential to significantly reduce costs for consumers,” the government said in a consultation.
If variable local wholesale prices are passed on to households it would be expected to mean lower bills for those living near wind farms, which are primarily located in Scotland and northern England, but those in London and the southeast are likely to pay more.
The consultation states: "Full nodal pricing on both the supply and demand side would have differential impacts on consumers, with prices in some parts of the country likely to fall and in others likely to Review of Electricity Market Arrangements rise.
"This could have distributional (and other) impacts, which would need careful consideration."
Launching the consultation, Business and Energy Secretary Kwasi Kwarteng said: "We’ve just seen the price of offshore UK wind power fall to an all-time low and gas is a shrinking portion of our electricity generating mix, so we need to explore ways of ensuring the electricity market is adapting to the times.
"That includes ensuring the cost benefits of our increasing supply of cheaper energy trickle down to consumers, but also that our system is fit for the future – especially with electricity demand set to double by 2035.
"In what could be the biggest electricity market shake up in decades, I am confident that this review will significantly enhance GB’s energy security and supply for generations to come."
Click here to read the full consultation paper. The consultation closes on October 10th.