10.07.2025

The Government has ruled out plans to introduce a zonal pricing system for energy, instead, choosing to reform the current system by reviewing transmission charging structures and encouraging private sector investment in renewable energy closer to areas of high demand. 

Both Make UK and UK Steel welcome this news. If a zonal pricing regime were to be implemented, it could create regional inequality in energy costs with manufacturers in areas with grid constraints potentially facing higher prices. While price volatility could reduce investment certainty and UK companies' competitiveness. 

For steelmakers tied to fixed sites, under zonal pricing, they would face higher electricity costs based on location. With the UK steel sector already hit by tariffs and power prices up to 50% higher than in France or Germany, this could've threatened jobs, investment, and decarbonisation efforts.

We welcome the decision by Government to retain a national pricing system and not introduce zonal pricing for wholesale electricity. It was important that we avoided creating a postcode lottery in energy prices which would have led to an unfair competitive market for industry. 

"The Government must now deliver proposals which quickly address the UK industrial energy prices which are amongst the highest in the world – four times that of the US and 46% above the global average.

“It is now critical that Government works with manufacturers in the coming weeks and months to stimulate growth to build on the ambition of the Industrial Strategy.
Stephen Phipson
Stephen Phipson CBE
CEO, Make UK

Zonal pricing is a method of setting electricity prices that vary by geographic area (or "zone") based on local supply, demand, and grid constraints.

Instead of having a single national electricity price, zonal pricing creates different prices in different regions, reflecting how easy or hard it is to deliver power to each area.

How It Works:

  • Zones with surplus electricity (e.g. lots of wind or solar generation) might have lower prices.
  • Zones with high demand or grid congestion might face higher prices.
  • The idea is to send price signals to encourage energy use and generation in more efficient locations.

Intended Benefits:

  • Can improve grid efficiency by better reflecting real costs.
  • Can encourage investment in renewables where they’re most needed.
  • Can reduce the need for costly grid upgrades by shifting demand.

Concerns (especially from industry):

  • Can penalise businesses in areas with poor grid connections.
  • Creates regional inequalities in energy costs.
  • Adds uncertainty for long-term investment in energy-intensive sectors like steel or manufacturing.