July 16, 2025

UK U-turn means Scots must continue to subsidise London’s energy

Scots are being swindled by UK energy policy. A fairer system that would have made electricity cheaper in Scotland - zonal pricing - could have fixed that. And it could have boosted Scotland’s economy - where businesses are constrained by having to pay the highest energy bills in the world. But the UK government has just ruled it out. 

The UK energy secretary Ed Milliband eventually decided it was too politically difficult to make energy cheaper in Scotland, where more than a quarter of all the UK’s renewable energy is produced, than in London and the south of England. 

The UK government's decision means that Scotland will continue to pay more so that England can pay less.

We effectively already have a system of zonal pricing; one where most Scots homes and businesses pay far more than those in England. That is despite the fact that Scotland is a net exporter of electricity.

There is no independent country anywhere in the world which is in a similar situation to Scotland. 

Last year, Scotland produced more renewable energy than the entire amount of electricity that the country used. This energy is cheap, The wind belongs to us all. All that is needed is a turbine and connectors. Yet households and businesses in Scotland are made to pay astronomical bills. 

Scots’ bills contain a hidden subsidy to England and a chunk of profit to the private firms which own our energy system.  

If Scotland were independent, it would not be in this position.

Because of being in the UK, Scots didn’t have a say over whether energy companies and the national grid should be sold off cheaply to multinationals. But that is what happened. The system that has resulted from the poorly regulated management of profit-hungry behemoths like SSE is not fair to Scots. 

A three-year consultation called REMA - review of electricity market arrangements -  made the case for switching to zonal pricing. This would make the best use of existing infrastructure and avoid the need to pay billions in public money to turn off wind turbines in Scotland. 

Zonal pricing is supported by Octopus, Ovo, The National Energy System Operator, Citizens Advice, The Social Market Foundation, The Resolution Foundation, The Energy Systems Catapult, Jonathan Brearley (Ofgem CEO), The Regulatory Assistance Project, Tech UK, E3G, Britain Remade, The Association for Decentralised Energy, Gresham House, and Statera Energy, among many others.

An energy industry insider, commenting on the Financial Times report on the decision not to go ahead with zonal pricing, wrote: “If there's no possibility of any meaningful REMA reform within the UK, then Scotland's only route to protect the public and industrial users might be by leaving.”

Now Scots are being made to pay more both to supply energy and to receive it. 

 

Here are three points about the zonal pricing situation: 

 

1 - Zonal pricing could boost Scotland’s economy

Scotland’s homes and businesses would use more electricity if it were more affordable. 

There is a lot of pent-up demand - if energy was cheaper then existing customers would use more. 

But also, new energy-hungry businesses would locate here as they have in other countries like Sweden which makes energy cheap in the north where it is produced. These areas are struggling - energy bills for businesses have no cap so businesses from hotels to food processing plants are being pushed to the wall. They pay much more than English businesses. It is ironic that Scots’ bills are set by the price of gas when the north of Scotland uses virtually no gas. 

But instead of going with a system of zonal pricing where energy could be cheaper close to where it is produced, the UK has chosen to stick with a UK-wide tariff for power. 

SSE, whose biggest shareholder is Black Rock. owns the national grid in the north of Scotland. It argues that it would be pointless to make energy cheaper because energy-intensive businesses simply would not want to relocate to the Highlands.

In fact one of the main arguments against zonal pricing is that Scotland is just not an attractive place for business. They argue that energy needs to be moved to “where it is needed” - maintaining London and the south east’s grip on Scotland’s resources. 

These arguments ignore the example of Scandinavian countries - Iceland has three alumium smelters to Scotland’s one. Sweden is making green steel with cheap energy. Most Scandinavian countries have more industry and are more prosperous than Scotland. Is that because Scotland is just a horrible place that few businesses would want to move to? Or is it because Scotland’s money and resources are being sucked to London? 

 

2 - A one-UK pricing structure is only applied where it works for England

Scots are made to pay higher standing charges than most of England because they have to pay for extra infrastructure to serve them. 

But when England needs extra infrastructure to supply it - who pays for that? Scotland! 

Scotland-based renewable energy providers have to pay ten times as much to connect to the grid as those based in England. They are effectively subsidising what should be seen as a national infrastructure project.

The UK is investing £30 billion of public money in the nuclear industry. But it is not doing the same with grid infrastructure. If that was seen as a UK-wide investment, and Scottish energy providers paid the same as those in England to connect to the grid, more Scottish renewable providers would support localised tariffs.

 

3 - Billions are spent in constraint payments to turn off Scottish wind

Privatisation has left the UK’s national grid weak. The lack of zonal pricing means that where the wind is - Scotland has two thirds of onshore wind - it often is not able to be moved to England. Local people and businesses can’t afford to use the power they need. Energy companies are paid to turn off the power that they can’t sell.

The energy companies don't mind this waste because they receive lucrative payments from the UK Electricity System Operator to turn off the power under ‘contracts for difference’. The energy firms prefer this to facing the challenge of charging less and hoping that this boosts local demand. After all - who honestly would want to move their energy intensive business to Scotland, they sneer. While counting the public money they get for turning off their expensive power. Does that sound like any kind of ‘free market’?

 

Conclusion

Scotland’s people never voted to privatise energy companies or the grid. If Scotland was an independent country, it would have national power companies as most European countries do. Those companies' main role is to provide power to homes and businesses. Instead, Scots are at the mercy of a private sector which is all about making profit for international shareholders, 

UK energy policy is designed for the benefit of England. The privatised system does not serve Scotland well. Scots pay more both to receive energy and to supply it. That is not fair. But this will never be addressed by successive UK governments, which prioritise England’s voters.

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