Scottish businesses are increasingly backing zonal pricing, a system that could cut energy bills and boost economic growth. A new report commissioned by Octopus Energy highlights that three in four businesses in Scotland view high energy costs as a major barrier to investment.
A Costly Paradox in Scotland’s Energy Market
Scotland is a leader in renewable energy production, generating vast amounts of wind and hydro power. However, under the current UK-wide pricing system, consumers and businesses in Scotland still face some of the highest electricity costs in Europe.
According to FTI Consulting, wind farm operators receive over £2 billion annually to shut down turbines when there is excess energy, instead of this power being used locally to reduce bills.
This inefficiency is now under scrutiny, with 64% of Scottish businesses supporting energy pricing reform, while just 14% oppose it. The manufacturing and IT sectors, which rely heavily on energy, have shown the highest levels of support for a shift to zonal pricing.
Business Impact and Economic Concerns
Many businesses in Scotland report that rising energy costs have hindered growth, recruitment, and investment. According to the research, if energy prices were reduced:
- 74% of businesses would increase investment.
- 64% would hire more staff.
- 70% would pass on savings to customers.
Greg Jackson, CEO of Octopus Energy, criticised the current pricing model, stating:
“Under our current system hard-up Scottish households and businesses are exposed to some of the highest energy prices in Europe, while wind farm owners are paid nearly £2 billion annually to turn off cheap green energy in Scotland that could be helping out local consumers.”
A Scottish business owner surveyed added that high energy costs had limited pay increases and the ability to hire new staff. Another participant emphasised that local businesses should benefit directly from Scotland’s renewable energy output.
The Case for Zonal Pricing
Zonal pricing would align energy costs with regional production, meaning areas generating significant renewable energy—such as Scotland—would benefit from lower prices. This model is widely used in other European countries, allowing local consumers and businesses to access cheaper power where it is produced.
According to FTI Consulting, a nationwide shift to zonal pricing could save UK households and businesses £55 billion over the coming decades. Supporters argue that the reform would increase economic competitiveness, improve business sustainability, and lower costs for Scottish consumers.
As discussions around energy pricing reform gain momentum, business leaders and policymakers face growing pressure to address the disparities in Scotland’s energy market. If implemented, zonal pricing could transform Scotland’s energy affordability and economic landscape.
