Clean Energy Regulation
REMA & Zonal Pricing
REMA Could Bring Benefits
Zonal pricing is under serious consideration in the GB power market—and it’s reshaping how investors assess risks and returns. While not yet guaranteed, the proposed shift away from a national price to a locational system brings both disruption and opportunity across the energy value chain.
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Key Takeaways:
- From National to Zonal: REMA proposes zonal pricing to better reflect local grid constraints, potentially lowering system costs by £30bn+ while increasing regional price volatility—particularly in Scotland.
- Winners & Losers: Flexible assets, long-duration storage, and southern solar are poised to gain. Conversely, new gas-fired generation may struggle with weaker economics under locational pricing.
- Storage in the Spotlight:Scotland’s volatility makes it a strategic hotspot for storage developers. Listed players like DRX*, IES*, GRID, and SAE* could benefit.
- Nuanced Impact on Generation: Wind stays focused on high-speed locations regardless of price signals, solar sees uplift in GB6, and biomass faces mixed BM revenues. Curtailment persists but shifts in character.
- Cost of Capital Crunch: Zonal volatility could push up WACC for generators, with modelled break-even points as low as +0.9%, posing challenges for merchant gas and some CfD projects.
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The UK government's consultation on electricity market arrangements brings market uncertainty, with shares reacting cautiously. However, outcomes for investors in clean energy companies could be minimal or beneficial