A new independent analysis by FTI Consulting suggests that adopting zonal pricing in Britain’s electricity market could save industrial manufacturers in East Yorkshire and Lincolnshire nearly £20 million, with broader national benefits exceeding £ 1 billion in cost reductions.
The study, commissioned by Octopus Energy, outlines how zonal pricing, which charges electricity based on regional supply and demand, would offer a more efficient alternative to the current flat-rate model. Under the proposed system, large industrial users in high-renewable or low-demand regions would benefit from significantly reduced electricity rates, relieving pressure on sectors already burdened by globally uncompetitive energy costs.
The findings are especially relevant for energy-intensive industries such as steel, chemicals, ceramics, paper, automotive, and tech, many of which are currently excluded from the government’s British Industry Supercharger scheme. While the Supercharger provides subsidies to about 370 firms, it does so by increasing costs for other consumers. That levy, currently totalling £410 million, is projected to more than double by the 2030s.
In contrast, zonal pricing is positioned as a zero-cost reform for households and small businesses. By reducing costs at the source rather than redistributing them, it could bring immediate relief to thousands of firms. Examples include savings of up to £19 million for a glassworks in Scotland, £14.5 million for a paper mill in North Wales, and £5–6 million for a car manufacturer in the North East.
The proposal has gained traction across the regulatory and industrial landscape, with support from Ofgem, NESO, Citizens Advice, the House of Lords Industry and Regulators Committee, and trade groups including techUK. These backers argue that energy cost reform is essential to maintaining the UK’s industrial competitiveness and attracting investment in future-facing sectors, such as data infrastructure and green manufacturing.
