Locational pricing may result in substantial financial savings on power payments.
This method, at the moment into account within the power sector, entails various the price of electrical energy based mostly on the particular location of consumption, reflecting the precise bills of delivering energy to every provide level or “node” on the grid.
A current evaluation by Ofgem, performed in collaboration with FTI Consulting and Power Programs Catapult, has make clear the potential advantages of implementing locational pricing.
The report means that if such a system is adopted, it may end in value reductions starting from £28 billion to £51 billion in Britain between 2025 and 2040, notably in a nodal market design.
In a zonal market design, the financial savings are estimated to be between £15 billion and £31 billion.
Along with the financial benefits, the report suggests locational pricing may result in societal advantages.
The research signifies that between 2025 and 2040, a nodal market design may contribute £13 billion to £24 billion in societal advantages, with a zonal market design probably providing £6 billion to £15 billion in such advantages.
In a press release, Power Programs Catapult and FTI Consulting mentioned: “The twin crises of power and residing prices have introduced into sharp focus the necessity to act to carry down shopper payments whereas concurrently supporting community infrastructure investments.
“In probably the most complete research performed into the advantages of locational pricing, working with FTI Consulting to advise Ofgem, we’ve discovered that introducing nodal pricing may scale back electrical energy payments by as a lot as £51 billion between 2025-2040, equal to £120 per family, per 12 months.”
Writing in response to the report’s findings, Rachel Fletcher, Director of Economics and Regulation and Octopus Power, mentioned: “This detailed evaluation from FTI and Power Programs Catapult exhibits that we may save many billions a 12 months by changing the usually meaningless common nationwide wholesale worth with markets that replicate the completely different system realities throughout the nation – and one of the best factor is all households would profit from it.
“The estimated financial savings to all prospects throughout Britain on this research are too large for policymakers to disregard.”
