One of the most anticipated outcomes in the energy sector was finally confirmed on Thursday 10 July, as the Government published its Review of Electricity Market Arrangements (REMA) Summer 2025 Update, announcing it will not proceed with zonal pricing.[1] Instead, the Government will pursue reforms within the existing national wholesale pricing model, bringing to an end a protracted and divisive debate.
In this article, Brevia Energy examines the key points from the REMA update and the next steps for electricity market reform.
What has been decided?
Following a second REMA consultation launched in March 2024, the Department for Energy Security and Net Zero (DESNZ) sought industry views on two competing options: transitioning to a zonal pricing model or retaining the current national pricing system. The consultation period saw intense debate, with industry stakeholders split over the benefits and risks of each option.
Ultimately, the Government opted to retain national pricing and pursue reform through strategic sector plans. While a full delivery roadmap is yet to be published, the following next steps are expected by the end of 2025:
- A Reformed National Pricing Delivery Plan
- Final REMA cost-benefit analysis of wholesale market models
- A National Energy System Operator (NESO) consultation on system balancing reforms
- Proposed Capacity Market reforms
The context
Since its launch in July 2022, REMA has explored comprehensive reforms to build a more flexible, secure, and decarbonised electricity system. Central to that debate was the issue of zonal pricing — a system whereby the GB electricity network would be split into several zones, each with their own price and boundaries to reflect where major network constraints occur.
Proponents argued that zonal pricing would improve system efficiency, reduce constraint costs, and deliver a fairer geographical transition. Opponents raised concerns about investor uncertainty, the risk of slowing the renewables pipeline, and potential impacts on the Government’s Clean Power by 2030 target.
As Phil Hewitt, Director of Montel Analytics observed: “Regardless of which side of the argument you’re on, everyone is pro-decision”.[2] That being said, whilst the announcement does offer clarity on pricing, it simultaneously opens a new phase of policy uncertainty as industry waits for the details of what national reform will involve.
One vocal proponent of zonal pricing, Octopus Energy, responded by calling for urgent clarity on the reform plans,[3] with Head of Policy Jack Richardson warning that the Government’s decision has taken the UK “back to square one”.[4]
Strategic Spatial Energy Plan (SSEP) and TNUoS Reform
Alongside its decision, the Government highlighted two key tools to help improve locational signals and strategic planning without adopting zonal pricing: the Strategic Spatial Energy Plan (SSEP) and reforms to Transmission Network Use of System (TNUoS) charges.
Described as the “centrepiece of reformed national pricing,” the SSEP aims to take a whole-system view of where and when energy infrastructure is needed. First recommended in the Nick Winser Review and announced in August 2023, the SSEP will underpin long-term strategic planning and is expected to be published in 2026.
TNUoS reforms, meanwhile, will aim to address concerns over volatility and unpredictability of network charges. The Government has committed to working with Ofgem on a detailed delivery plan, to be published by late 2025, with full reform expected by 2029. These changes aim to deliver more stable investment signals and promote efficient use of the existing transmission network.
Importantly, the Government suggests that this package of reforms could deliver some of the location-based outcomes desired by zonal pricing advocates, but without the perceived investment risks of a zonal system.
Contracts for Difference (CfDs) and Investment Certainty
A key argument against zonal pricing was the potential disruption it could cause to the Contracts for Difference (CfD) regime, particularly with Allocation Round 7 (AR7) on the horizon. The uncertainty surrounding REMA was seen as a barrier to investor confidence.[5]
Now that a decision has been made, some of that uncertainty has been lifted, potentially offering greater confidence to CfD bidders. However, the sector will be watching closely to see whether further reforms introduce new complexity or instability.
Conclusion
The REMA Summer Update ends the long-running debate on zonal pricing, but marks the beginning of a new phase of market reform. While the Government has committed to refining the national pricing model, full clarity on the direction of travel will only come when the delivery plans are published later this year.
With several reforms not expected until the end of the decade, stakeholders must engage actively with Government to shape the details and ensure alignment with 2030 decarbonisation targets. The energy sector’s focus now shifts from if reform will happen, to how it will be delivered.
Brevia Energy is a dedicated division of Brevia Consulting, and has a longstanding reputation for its expertise and experience in the Energy Sector.
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Notes
[1] Department for Energy Security and Net Zero, ‘Review of electricity market arrangements (REMA): Summer update, 2025’, 10 July 2025, Link
[2] New Power, ‘Zonal pricing out, reformed national price in: the industry reacts’, 10 July 2025, Link
[3] Octopus Energy, ‘Octopus responds to Government’s decision to scrap Zonal Pricing’, 10 July 2025, Link
[4] Solar Power Portal, ‘Rejection of zonal pricing brings ‘clarity not resolution’’, 11 July 2025, Link
[5] Utility Week, ‘ REMA creating low carbon investment ‘hiatus’’, 28 April 2023, Link
