The UK Government has confirmed that it will not proceed with zonal electricity pricing, retaining a single national wholesale price. While zonal pricing undoubtedly had some upsides for energy storage with potential for a larger regional spread and potential increased arbitrage opportunities, its removal eliminates a potential source of revenue volatility for battery and long-duration energy storage projects.

Responding to the announcement, Jason Howlett CEO of Energy Storage Association UK described it as “much-needed policy clarity,” noting that it reduces the risk associated with grid reforms. Lower policy-risk premiums are expected to cut the cost of capital for storage developers and enhance returns on both short-duration batteries and long-duration projects.

Crucially, the government’s package potentially goes beyond a return to the status quo by introducing measures that will directly benefit energy storage and potentially energy storage developers and operators:

Shorter settlement periods: Transitioning from 30-minute to 5 or 15-minute settlement intervals will sharpen price signals, enabling storage operators to capture more granular price peaks and troughs.

Better balancing access: National Electricity System Operator (NESO) will consult on granting storage sites direct access to balancing markets, reducing constraint payments and opening new revenue streams for grid services.

Predictable network charges: Reforms to Transmission Network Use of System (TNUoS) charges will align locational signals with spatial system plans, allowing storage developers to site projects where they deliver maximum value and know their costs years in advance.

On the capacity side, a revamped Capacity Market will set minimum procurement levels for low-carbon, fast-response assets. This change is expected to drive higher clearing prices for batteries compared with the current uniform auction design.

The energy system needs all contributors, and energy storage has a vital role to play in all market models.

10th July 2025