A new study, commissioned by Octopus Energyfound that by implementing sweeping reforms to the UK electricity market, the government could reduce household bills across the country, with those in Scotland with the greatest profit. The Energy Systems Catapult (ESC) report “Location, Location, Location” found that by moving to a market with location-based wholesale pricing electricitycould save households as much as £30 billion by 2035.
By pricing electricity based on regional conditions, this mechanism could encourage investment in local communities with favorable conditions for renewable energy generation, such as high winds.
While the study found that it would bring savings to users in all regions, those in Scotland and the North East would do better.
Speaking to Express.co.uk, Octopus Energy said a major reason for this is the strong winds in Scotland, which are being exploited by wind farms in the North Sea.
They said: “We recently conducted a study with the Energy Systems Catapult which showed that location-based pricing could save electricity users £30 billion, as much as £1000 per household by 2035.
“If we don’t reform the system, households will continue to bear the brunt of increasingly expensive fossil fuels.
Under current systems, consumers are forced to pay for increasing costs incurred in balancing the electricity system.
Electricity producers can now sell their power at costs set by the national market, even if the electricity is generated far away from high demand city centers and the grid has no way to physically transport the energy there.
As ESC explains, the mix of electricity generation in the UK is regionally diverse, but there is one price signal in the UK despite huge variations in supply and demand across regions.
READ MORE: Octopus Energy launches multimillion-dollar scheme to save £3,775
This means that even if there is no power demand, such as in parts of Scotland that already produce excess energy from wind power, industries and households will still have to pay for unnecessary power at the wholesale price.
Octopus Energy noted that Scottish homeowners would benefit greatly from these reforms and said: “Scotland has a brilliant portfolio of renewable energy generators and is blessed with constant wind to allow them to produce clean, green energy.
“Of course it would be a huge help for families across the country to be able to take advantage of that locally as it would make the network more efficient overall.”
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According to Energy Systems Catapult, more than £1 billion is spent annually by the electricity system operator on “balancing actions”.
These actions include paying some generators – including wind farms – to shut down to manage physical constraints on the grid and to ensure the system operates in real time.