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UKERC modelling shows strike prices could go up by £20/MWh Modelling by the UK Energy Research Centre (UKERC) shows zonal pricing could increase strike prices in upcoming CfD auctions by up to £20/MWh, as investors factor in the additional future volume risk that stems from exposure to transmission capacity uncertainty. These elevated strike prices could increase consumer costs by up to £3bn annually, offsetting financial benefits from zonal pricing. It also shows that zonal pricing risks should decrease over time as transmission infrastructure development unfolds, suggesting that zonal pricing would ideally be introduced after resolving key transmission uncertainties. Zonal pricing, combined with transmission constraints, could reduce generation investment in constrained regions. Professor Rob Gross, Director of UKERC, said: “The 2030 clean power mission is an exceptionally bold endeavour that requires coordinated action across government and industry to mobilise an unprecedented pace of investment in generation assets and transmission capacity. “Our analysis focuses on the risks for market participants if Government tries to bring in zonal pricing at the same time. “These are substantial and there is no straightforward plan B. “The key question is not whether zonal pricing has benefits, but whether the time to introduce it is now.” |
