We need a Welsh electricity zone

Electricity meter.

Jonathan Edwards

The UK Government’s Review into Electricity Market Arrangements is in danger of being a potentially cataclysmic missed opportunity for Wales.

The previous UK Government launched a consultation into how to reform the UK’s outdated electricity market based on introducing zonal/locational electricity pricing.

The work has been continued by the new UK Government and is due to report soon. Ed Miliband, the Secretary of State for Energy Security and Net Zero, is under considerable pressure from some industry insiders to keep things as they are and not to adopt a zonal pricing system.

However, if the UK Government goes down the road of reform, it is set to recommend the creation of seven market zones for Great Britain (Northern Ireland is linked to the Republic). A radical nodal model based on 850 locations has been ruled out from what I read.

Lower costs

Under a zonal system, areas that produce vast amounts of electricity yet have low demand should enjoy lower costs, enabling them to tackle crushing social justice issues such as fuel poverty, and critically to entice industries and other high energy users such as datacentres to locate in those zones bringing direct economic value. Proponents argue a zonal system is vital if net zero targets are to be met.

Some years ago I wrote an article that Wales was an electricity exporting superpower, based on figures showing that at the time no other country in Europe exported a higher proportion of the electricity generated than Wales at 50%.

To put it in context, nearly every other country in Europe runs an electricity deficit. Despite our strength in electricity generation, over a third of Welsh households are fuel poor.

The problem Wales faces is that there is no dividend for us as a country under the current system; the wealth is syphoned out of Wales. It is extractive in nature.

As a designated zone with significant generating assets yet low demand, Wales would have low-cost electricity. It offers more economic opportunity for Wales than anything published in the big growth speech last week by the Chancellor.

Implemented correctly it has the potential to be a game changer for the Welsh economy and for tackling one of the biggest social scourges of our time – cold homes.

GB6

Regrettably however it appears that the UK Government preference is for seven zones which would see the south of our country included in an area stretching to East Anglia, including London, in so-called GB 6. Meanwhile the north will be included in GB 4 which would stretch across Liverpool and Manchester to the Humber.

The zones, from what I understand, have been chosen based on existing transmission boundaries.

Ironically due to the high demand natures of the two zones Wales would be split into, electricity prices under locational pricing methodology would be far higher than a Wales-only zone. There would be no dividend for Wales and our people – the zonal model under consideration will continue to be extractive.

Scotland meanwhile will have its territorial integrity protected in two distinct Scottish zones.

Much energy in Welsh political circles is consumed by the debate over control of Welsh Crown Estates territory. I initiated the campaign in Westminster and understand its significance. However, it is small fry compared to the potential missed opportunity for Wales if a zonal model is implemented for GB and the preferred seven areas are adopted by the UK Government.

Potential gains

A cursory look at the Senedd Record and Parliamentary Hansard in Westminster indicates that no Welsh politician is on the case. I readily admit to not being an expert, but you would expect someone in the Welsh political class to be challenging the powers that be considering the potential gains for Wales and our people.

We need a Welsh specific zone, and we need it now, while understanding that may require significant investment in developing transmission infrastructure within Wales. As far as I can see, there is no rational reason why there can’t be a Welsh specific zone.

Wales must play to its strengths. Our status as an electricity generating superpower is an obvious one. A Welsh specific zone would be transformative, the leg up our country desperately needs.

I hope Welsh Ministers are on the phone to Mr Miliband.

Jonathan Edwards was the MP for Carmarthen East and Dinefwr 2010-2024