UK wind farm owners receive millions in payments to shut down turbines.

UK Wind Farm Payments and the Case for Zonal Pricing Reform

Under the current national pricing system, wind farm owners receive millions of pounds to shut down turbines when the electricity grid becomes too congested. This congestion arises because many wind farms are located far from cities, and the main power transmission routes struggle to handle the supply.

When this happens, electricity must be sourced from generators closer to areas of demand—at significantly higher costs—to compensate for the shortfall.

These payments, ultimately covered by consumers, are projected to cost billions annually by the end of the decade.

The Cost of Congestion

On a single day last week, more than £4 million was paid to wind farms to switch off, while an additional £11 million was spent securing power from alternative generators, according to market data. The Telegraph has previously reported that these inefficiencies have cost billpayers approximately £180,000 per hour so far this year.

The Case for Zonal Pricing

Zonal pricing would eliminate these costly payments by encouraging households near wind farms to use more electricity when excess power is available—offering them lower rates as an incentive.

Octopus Energy, a leading advocate of these reforms, argues that the changes would also encourage wind farm developers to build turbines closer to cities, reducing the need for expensive transmission infrastructure and ultimately lowering energy bills across all regions.

The company insists that transitioning to a zonal system is the only viable way to reduce domestic energy costs

Greg Jackson, CEO of Octopus Energy, stated:

“Electricity costs are a drag on the economy, with high bills for households and businesses while billions are wasted switching off wind farms on windy days. Most of those opposing the change happily invest in countries with zonal pricing. It’s absurd to suggest Britain should be an exception.”

Political Barriers to Reform

A move to zonal pricing was previously considered under Boris Johnson’s government but was ultimately rejected due to concerns that regional price differences would be politically sensitive.

However, as the UK’s energy grid becomes increasingly reliant on renewables, experts believe the shift to zonal pricing will become unavoidable.

Uncertainty Over Zonal Pricing Clouds Renewable Energy Auctions

Ed Miliband has pledged that by 2030, no more than 5% of Britain’s electricity will be generated by gas-fired power stations.

Despite growing speculation that a decision on zonal pricing could be imminent, an executive from a major wind farm developer stated that Mr Miliband’s stance on the issue remains largely unknown.

The lack of clarity is creating turmoil ahead of the upcoming subsidy auctions for renewable energy—officially known as Auction Round Seven (AR7), the executive warned.

“Bidding opens in July, yet we still have no idea what the potential model will be or how many zones it will include,” they said.
“Right now, it’s impossible to assess the risks. The government must publish its decision soon—whatever it may be.”

A government spokesperson responded on Friday, emphasizing the need for energy security:

“In an increasingly unstable world, the only way to safeguard our energy future and shield consumers from price shocks is to expand domestic energy production. We are reviewing potential reforms to Britain’s electricity market to ensure they protect bill-payers and attract investment.”