Locational Pricing in the GB Electricity Market: Overview of Key Perspectives and Implications

The energy sector is undergoing significant transformation, driven by governments’ ambitious net-zero goals. Among the most substantial changes being considered by the UK government is the redesign of the GB electricity market, involving a shift from national pricing to locational pricing. According to the UK government’s own modelling, this shift could yield savings of £5 billion to £15 billion between 2030 to 2050. However, locational pricing has sparked one of the most contentious debates in the GB electricity market, with stakeholders presenting strong arguments on both sides.

If implemented, locational pricing would have far-reaching implications, extending beyond the energy sector. This paper provides an overview of the potential benefits and challenges identified by various stakeholders. Additionally, it examines how locational pricing is implemented in European countries such as Italy, Denmark and Sweden. A particular focus is given to the potential impact of this transition on energy investments in the UK such as interconnectors and battery energy storage systems.