THE PRICE OF CHEAPER ELECTRICITY

Greg Jackson is not wrong about that. But when independence supporters amplify his remarks, the subtext is obvious: we are meant to think it represents a small window into the opportunities of Scottish independence. After all, if zonal pricing might cut electricity prices in Scotland, just think what independence could do.

But these stories always miss a critical point: what is the Scottish Government’s position on zonal pricing? And what does it tell us about the risks of independence?

Zonal pricing is one of the proposals the UK Government has taken forward into the next stage of the Review of Electricity Market Arrangements (REMA).

It creates winners and losers. Consumers of electricity in regions with an excess of supply over demand (like Scotland) would stand to benefit. But owners of generation assets in those regions would lose out. And Scotland would become less attractive as a place to build future generating capacity.

This is why the Scottish Government has significant reservations. Answering a recent question in the Scottish Parliament, Gillian Martin, the Minister for Energy, said this:^{1https://www.parliament.scot/chamber-and-committees/questions-and-answers/question?ref=S6W-27501}

“We are aware of the potential impacts, both positive and negative, that locational marginal pricing could have for market participants, and we are cognisant of concerns expressed by the renewables industry in Scotland.”

Here’s the rub: lower electricity prices for consumers in Scotland would mean lower revenues for generators in Scotland, and the Scottish Government has repeatedly stressed that the interests of the renewables industry must be weighed against those of electricity consumers.

The SNP want people to believe that zonal pricing is something Westminster is denying to Scotland, and which it would love to deliver. But the opposite is true: the UK Government is pushing forward with plans which could deliver zonal pricing, while the SNP Government in Scotland is raising concerns.

And Scottish independence would not remove those concerns. It would multiply them. Zonal pricing regionalises wholesale prices, but under the umbrella of a fully integrated market. It does not break apart the single market for electricity across Great Britain.

That single market has been (and will continue to be) critical to the success of the renewables industry in Scotland. It guarantees that consumers across Great Britain will underwrite the hugely expensive grid upgrades necessary to connect Scottish renewables with customers.

If the SNP is worried about small steps in the direction of regionalising the market (and it is) then imagine how much more damaging it would be for Scotland to find itself completely outside that market.

Scotland is a powerhouse in renewable energy because it is part of the fully integrated single market for electricity in Great Britain. Outside of that fully integrated market, Scotland would be a considerably diminished power.

An abridged version of this piece was first published by The Times, on 17th July 2024.