UK Government Retains National Electricity Pricing Amid Clean Energy Push

In a significant move to bolster the United Kingdom’s transition to clean energy, the government has announced its decision to retain a single national wholesale electricity market, effectively dropping plans for zonal pricing. This decision, which aims to provide stability and predictability for investors, reflects the government's commitment to accelerating clean power initiatives without disrupting the current market dynamics.

The announcement was made on July 11, 2025, and has been met with approval from various stakeholders in the energy sector. Ronan Lambe, an energy projects expert at Pinsent Masons, emphasized the importance of this decision, noting that the introduction of zonal pricing could have led to significant investment risks and increased costs for energy projects. "Stakeholders warned that the introduction of zonal pricing would create uncertainty across various deals, particularly where electricity prices are secured over extended periods," Lambe stated.

The UK government intends to implement a reformed national pricing model that aligns network and connection charges with strategic planning efforts to support long-term investments. Gabby Greenslade, another energy projects lawyer at Pinsent Masons, remarked that this approach emphasizes stability and resilience, crucial elements in navigating the energy transition. She added, "The predictability offered by the reformed national pricing model allows investors and consumers to plan confidently."

At the core of this reform is the Strategic Spatial Energy Plan (SSEP), which aims to guide coordinated planning and proactive investment in energy infrastructure. The SSEP will identify optimal locations and types of energy infrastructure necessary for the UK’s clean energy transition, thereby reducing delays and costs associated with connecting new projects to the grid. The first version of the SSEP, which will focus on electricity and hydrogen generation, is expected to be published in 2026, providing clarity to industry players while allowing market competition to determine viable projects.

Further actions outlined by the government include the upcoming publication of a national pricing delivery plan, which will detail the design and implementation roadmap for the reformed pricing strategy. Additionally, a full review of the electricity market arrangements (REMA) is anticipated later this year, including a comprehensive cost-benefit analysis of potential wholesale market reforms.

As the government collaborates with the National Energy System Operator (NESO) to implement the SSEP by 2026, it also plans to work with Ofgem to advance necessary reforms to transmission network use of system (TNUoS) and connection charges. The government’s proactive measures aim to foster a stable investment environment while ensuring fairness for consumers, as uniform national pricing will continue to be maintained.

The implications of this decision are far-reaching, as it seeks to balance the urgency of transitioning to clean energy with the need for market stability. By alleviating potential investor concerns and promoting a cohesive framework for energy infrastructure, the government aims to enhance the UK's competitiveness in the global clean energy landscape. As various stakeholders await the final review of electricity market arrangements, the broader context of these reforms underscores the UK government's commitment to a sustainable and resilient energy future.