Energy prices: Grandmother worried about upcoming 'winter bill'

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A new study, commissioned by Octopus Energy, found that by ensuring sweeping reforms to the UK’s electricity market, the Government could ensure bills are slashed for households across the country, with those in Scotland facing the largest gains. The report ‘Location, location, location’ by Energy Systems Catapult (ESC) found that by moving to a market with locational pricing for wholesale electricity, households could save a staggering £30billlion by 2035.

By pricing electricity based on the conditions surrounding the region, this mechanism could incentivize investment in local communities with favourable conditions for renewable energy generation, like strong winds.

While the study found that it would allow savings for users in all regions, those in Scotland and the North East would fare better.

Speaking to, Octopus Energy said a major reason for this is powerful winds in Scotland, which are harnessed by North Sea wind farms.

They said: “We recently did a study with the Energy Systems Catapult which showed that locational pricing could save electricity users £30billion, as much as £1000 per household, in the period to 2035.

“If we don’t reform the system, households will continue to bear the brunt of increasingly expensive fossil fuels for longer.

Under the current systems, consumers are forced to pay for spiralling costs incurred while balancing the electricity system.

Electricity generators right now can sell their power at costs set by the national market, even if the electricity is generated far away from city centres of high demand, and the network has no way to physically transmit the energy there.

As ESC explains, the UK’s electricity generation mix is regionally diverse, but a single price signal across the UK exists despite huge variations in supply and demand across different regions.

This means that even when there is no demand for power, such as in parts of Scotland which already produce excess energy from wind, industries and households are still having to pay for unneeded power at the wholesale price.

Octopus Energy noted that Scottish homeowners would gain a massive advantage under these reforms, saying: “Scotland has a brilliant portfolio of renewable energy generators and is blessed with consistent winds to keep them producing clean, green energy.

“Of course being able to benefit locally from that would be a massive help for families all across the country, as it would make the grid more efficient overall.”

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According to Energy Systems Catapult, over £1billion is spent each year by the electricity system operator on “balancing actions”.

These actions include paying some generators – including wind farms – to switch off to manage physical constraints on the grid and to ensure that the system functions in real-time.

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