In June 2025, the Keir Starmer government announced that all newly built homes in the UK would feature rooftop solar panels by default, aiming to cut energy costs and accelerate progress toward carbon-reduction goals. In fact, the Labour administration wants to build 1.5 million new homes by 2029 amid a housing shortage, while using the policy goal to promote its renewable energy commitments.
A typical existing British home will be able to save around £530 ($717) once it takes the “rooftop solar” route. However, International Finance will focus on a different issue. It’s often referred to as the “energy bills problem.”
A crisis on the way?
Scotland is known for its gale-force winds that sweep across the country in the summer months. And going by the layman’s understanding, this should serve as the “great weather” for the Moray East and West offshore wind farms.
Senior environment journalist Justin Rowlatt said, “The two farms are 13 miles off the northeast coast of Scotland and include some of the biggest wind turbines in the UK, at 257m high. With winds like that, they should be operating at maximum capacity, generating what the developer, Ocean Winds, claims is enough power to meet the electricity needs of well over a million homes. Except they are not.”
An electricity generator, whether it be a wind farm or a gas-powered plant, should be connected to the national grid to seamlessly send its electricity wherever it is needed in the country. This is the problem: in the UK’s case, the electricity grid, which was built to deliver power generated by coal and gas plants near the European country’s major cities and towns, does not have sufficient capacity in the wires that carry electricity around the nation to transmit the new renewable electricity generated in remote seas and rural areas.
“The way the system currently works means a company like Ocean Winds gets what are effectively compensation payments if the system can’t take the power its wind turbines are generating and it has to turn down its output. It means Ocean Winds was paid £72,000 not to generate power from its wind farms in the Moray Firth during a half-hour period on 3rd June because the system was overloaded, one of several occasions output was restricted that day,” Rowlatt noted.
“At the same time, 44 miles (70km) east of London, the Grain gas-fired power station on the Thames Estuary was paid £43,000 to provide more electricity. Payments like that happen virtually every day. Seagreen, Scotland’s largest wind farm, was paid £65 million in 2024 to restrict its output 71% of the time, according to analysis by Octopus Energy,” he added.
Balancing the grid in this way has already cost the Starmer government more than £500 million in 2025 alone, Seagreen’s analysis shows. The total could reach almost £8 billion a year by 2030, warns the National Electricity System Operator (NESO), the body in charge of the electricity network.
It is pushing up all the Britons’ energy bills and calling into question the government’s promise that net zero would end up delivering cheaper electricity. To address this, the Starmer government is considering a radical solution: instead of one big national electricity market, there will be several smaller regional markets, with the administration gambling that this could make the system more efficient and deliver cheaper bills.
Households and businesses will pay different rates depending on how close they are to wind and solar farms. Baroness Dido Harding, who led the government’s test and trace scheme in England during the COVID-19 pandemic, and Lord Udny-Lister, a former Downing Street chief of staff, are among the influential personalities extending support to so-called “zonal pricing.”
The House of Lords Industry and Regulators Committee says the proposals should help cut the costs of electricity, but also warns any reforms would need to be carefully managed, given the probable impact on some generators and heavy industry.
The proposal’s backers argue that it is needed to create a more efficient market that considers the vast numbers of wind turbines being built across the United Kingdom as part of the country’s plans to cut emissions. They further argue that there is not enough capacity on Britain’s electricity grid to move electricity to where it is needed, particularly from wind farms in remote parts of Scotland. But these constraints are not recognised by Britain’s single national wholesale price, which currently means wind farms are frequently paid to switch off.
Zonal pricing would help tackle this by splitting the market into different regions broadly reflecting the distribution network, with the price settled according to local supply and demand. The move will also result in northern Scotland enjoying the benefits of cheap wholesale prices for electricity during windy periods, encouraging households to charge their cars, rather than having to turn the wind farms off.
However, big energy developers warn that less certainty over power prices would put them off investing, just as the government is trying to get vast amounts of new offshore wind built to meet its clean power targets. Some critics are also concerned about the risks of a “postcode lottery” for households, depending on the extent to which zonal pricing feeds through into retail electricity bills.
The Lords Committee also warned that the Starmer government risked missing its target to decarbonise the power system by 2030, given the pace and scale of new infrastructure that needs to be built.
According to reports, Starmer has asked to review the details of what a section of the British media is calling a “postcode pricing” plan. So, there are a couple of questions: is the government ready to risk the most radical shake-up of the British electricity market since privatisation 35 years ago? And what will it really mean for the power bills?
Understanding the math
Supporters of the Starmer government’s plan argue that as long as energy prices are set nationally, it will remain difficult to loosen gas’s grip on electricity costs. Less so with regional pricing, or, in the jargon, “zonal” pricing.
They cited Scotland as an example, highlighting its abundant wind resources contrasted with a relatively small population of just 5.5 million. The argument goes that if prices were set locally, it would not be necessary to pay wind farms to be turned down because there was not enough capacity in the cables to carry all the electricity into England.
All that cheap power could also transform the economics of industry, attracting energy-intensive businesses such as data centres, chemical companies, and other manufacturing industries. In London and the south of England, the price of electricity sometimes gets higher than in the windy north. However, supporters say some of the hundreds of millions of pounds saved by the system can be used to make sure “no one pays more than they do now.”
“And those higher prices could also encourage investors to build new wind farms and solar plants closer to where the demand is. The argument is that it would lower prices in the long run and bring another benefit, because less electricity would need to be carried around the country, so we would need fewer new pylons, saving everyone money and meaning less clutter in the countryside,” Rowlatt remarked.
“Zonal pricing would make the energy system as a whole dramatically more efficient, slashing this waste and cutting bills for every family and business in the country,” asserts Greg Jackson, the CEO of Octopus Energy, one of the biggest energy suppliers in the United Kingdom.
Recent research commissioned by the company estimated the savings could top £55 billion by 2050, which it claims could knock £50 to £100 a year off the average bill. Octopus points out that Sweden made the switch to regional pricing in just 18 months.
Energy firms push back
Tom Glover, UK chair of German energy giant RWE, emphasised the scale of their annual renewable investments in the UK, stating he couldn’t justify asking his board to gamble billions without certainty.
“The main cost of wind and solar plants is in the build. It means the price of the energy they produce is very closely tied to the cost of building, and, because developers borrow most of the money, that means the interest rates they are charged. And we are talking a lot of money. The government is expecting power companies to spend £40 billion a year over the next five years on renewable projects in the UK,” Rowlatt noted.
Glover says even a very small change in interest rates could have dramatic effects on the amount of renewable infrastructure built and the cost of the power produced.
High interest rates, combined with rising prices for steel and other materials, will likely increase the cost of renewables. Plans for a huge wind farm off the coast of Yorkshire were cancelled recently as the developer said it no longer made economic sense.
The National Grid, which owns the pylons, substations, and cables that move electricity around the country, is rolling out a huge investment programme worth some £60 billion over the next five years to upgrade the system and prepare it for the new world of clean power. That new infrastructure will mean more capacity to bring electricity from the windy northern coasts down south, and therefore also mean fewer savings from a regional pricing system in the future.
Critics also warn that introducing regional pricing could take years, and the system will be unfair because some customers will pay more than others.
However, according to Greg Jackson of Octopus, the power companies and their backers just want to protect their profits.
In contrast, the power companies argue that Octopus also has a vested interest in this situation. As the largest energy supplier in the United Kingdom, serving around seven million customers, Octopus possesses an advanced billing system that it licenses to other energy suppliers. Therefore, it stands to benefit from any changes to the pricing of electricity.
The Starmer government’s ability to meet its clean energy goals will depend on how many new wind farms and solar plants are built. The companies that will build them say they need certainty around the future of the electricity market, so a decision must be made soon. Whether Miliband and his administration choose to act decisively remains to be seen.