'Not the right time' for zonal power pricing in UK: National Grid CEO

Plans to divide Britain into multiple power price zones would constitute a "major reconstruction" of the electricity market and should be postponed until the 2030s, given ongoing regulatory reforms and the industry's significant investment needs, the outgoing CEO of National Grid, John Pettigrew, said May 15.

Britain requires "stability and certainty" to attract investment in clean energy and grids, and the country is already undertaking reforms to its retail market, grid connections and the planning system, Pettigrew told analysts as National Grid announced its annual results.

"I think the bar for any incremental change on top of what's already going on should be very, very high," the CEO said. "And my sense at the moment is that now is probably not the right time for introducing a major reconstruction of how the market operates through zonal pricing."

The market will "look very different" in the 2030s. "And I think maybe that's the time when you might potentially look at the advantages of zonal pricing," Pettigrew added, pointing to benefits around price discovery and resolving grid constraints.

"To do it today, I think it just doesn't feel like the right time," the CEO said.

Price zones

Pettigrew's comments represent the latest intervention in a long-running debate around zonal pricing that has divided the UK electricity industry.

The proposals would see Britain split up into several different price zones to help encourage building more generation closer to demand hubs. In a zonal system, areas with high renewables generation and low demand would see lower prices.

Proponents include Octopus Energy and the Association for Decentralized Energy, which argue that the reforms would make the power system more efficient, help bring down consumer bills and reduce wind farm curtailment costs.

However, critics -- such as several major UK power generators and trade groups -- say that such a fundamental overhaul would stifle investment and create uncertainty for large energy users.

The government is set to make a decision on the matter before the summer, opting either to go ahead with zonal pricing or stick with a form of national pricing.

UK Energy Secretary Ed Miliband recently ruled out making any changes that would raise consumer bills in any part of the country.

Progress in UK, impairment in US

Whatever road the UK chooses to go down in its power market reform, National Grid is unlikely to be impacted since its five-year investment plan extends to 2029 and any changes would likely come after that, Pettigrew said.

The company's fiscal 2025 results brought to an end the first year of that plan, which in total will see it spend GBP60 billion on growing its electricity and gas grids in the UK and the US.

Capital expenditures last year reached a record GBP9.84 billion, growing 20% compared to the prior year, as National Grid made progress on several Accelerated Strategic Transmission Investment (ASTI) projects in the UK.

All six of the company's "wave 1" ASTI projects are now under construction, including Eastern Green Link 1 and 2, which together will comprise 700 kilometers of subsea cables between Scotland and England.

Eastern Green Link 1 is expected to be delivered 16 months late due to supply chain issues, but Pettigrew said there is no read across to other ASTI projects, for which the company has "an awful lot of things in place" already.

Elsewhere, National Grid announced a GBP303 million impairment on its 2.8-GW Community Offshore Wind project in the US, which it is developing in a joint venture with Germany's RWE AG.

The move, which fully writes down National Grid's investment in the joint venture, comes amid a broader slowdown in the US offshore wind market since President Donald Trump took office in January. Longer-term trends in the US are still supportive for the industry, CFO Andy Agg said.

"We continue to view that there are likely further energy needs in the Northeast," Agg told analysts. "And to the extent that means this project comes back on, we will be very close working with RWE to pursue that."