Thought Leadership: Zonal Pricing Could Undermine Green Tariffs

By Simon Shaw, Regulatory Affairs Manager, Good Energy

As the UK edges closer to a pivotal decision on the future of its electricity market, the risks of choosing the wrong path have never been clearer. The government’s Review of Electricity Market Arrangements (REMA) is weighing two major options: a reformed national market or the introduction of zonal pricing. The implications of this decision could fundamentally reshape how renewable energy is traded, supplied, and supported across the country.

The REMA debate has been dominated by large-scale players, overshadowing the voices of organisations that provide a critical route to market for small-scale renewable generators. These are the same organisations that empower consumers to actively support the clean energy transition through genuine 100% renewable tariffs. Their perspective and the choices of consumers deserve far more attention.

A Threat to Consumer Choice

One of the most overlooked consequences of zonal pricing is its potential to restrict consumer access to genuine green energy. Under the current system, suppliers like Good Energy purchase electricity directly from a broad network of independent renewable generators through Power Purchase Agreements (PPAs). This nationwide approach allows customers to choose tariffs that reflect real, traceable renewable energy.

Zonal pricing could change that. If suppliers are restricted to contracting only within defined geographic zones, access to 100% renewable tariffs could be severely limited, particularly in areas with insufficient local renewable capacity. Consumers who have deliberately chosen to back green energy might find themselves locked out from doing so, simply based on their postcode.

This outcome would not only erode consumer choice but also damage the support ecosystem for smaller renewable projects, including community-led initiatives.

Risking Investment at a Critical Time

Market stability is essential for unlocking investment in renewable energy. The introduction of zonal pricing could introduce significant uncertainty, especially for smaller generators who rely on direct agreements with suppliers.

At Good Energy, over 40% of the electricity we supplied in the most recent compliance period came from new grid-connected sources. These projects depend on a predictable market environment. If zonal pricing limits our ability to enter into PPAs with generators nationwide, the knock-on effect could be a chilling impact on investment in new renewables.

With implementation unlikely before the early 2030s and many design details, like the number and boundaries of zones, still unclear, the sector is facing a prolonged period of uncertainty. That’s a dangerous prospect at such a crucial stage of the UK’s energy transition.

Practical Reforms 

We do need reform—but it must be reform that works for renewable energy and the consumers who want to support it. Here are five targeted actions that could deliver real benefits without the risks of zonal pricing:

1. Strengthen Renewable Evidence Requirements Require suppliers to demonstrate how much renewable energy they procure—not just rely on certificates. This would incentivise smarter, more efficient procurement and support the decentralised renewable sector.

2. Introduce 24/7 Renewable Matching Time-based matching—aligning supply with demand every hour of the year—can improve transparency for consumers and encourage a balanced mix of technologies in optimal locations.

3. Reform Network Charging Instead of dividing the country into zones, we can strengthen locational investment signals through targeted network charge reforms. This includes reducing reliance on standing charges and enabling more flexibility through dynamic pricing.

4. Scale Up Demand-Side Flexibility The supply side can’t do it alone. REMA must prioritise the demand side too, with strong incentives and joined-up regulation to unlock the full potential of flexible energy use.

5. Move Levies from Bills to Taxation Electricity bills are currently burdened with social and environmental levies, making it harder for consumers to electrify their homes and lives. Shifting these costs to general taxation would lower bills and support the wider transition.

Reforming the electricity market is overdue. But reform must support the continued growth of renewables and expand, not restrict, consumer choice. Zonal pricing might seem like a clean solution on paper, but in practice, it risks fragmentation, exclusion, and slowed investment.

From our vantage point, working directly with renewable generators across the UK, the risks of zonal pricing are too high. Let’s choose reform that accelerates decarbonisation, strengthens the grid, and keeps consumers at the heart of the energy transition.