Tech firms call for zonal electricity pricing in UK to fuel AI datacentres

Yahoo

10-02-2025

Tech companies are putting pressure on the UK government to encourage an AI datacentre boom in remote areas of Great Britain by offering some of the cheapest electricity prices in Europe.
A report paid for by the tech companies Amazon and OpenAI has called on ministers to overhaul the UK's electricity market by splitting it into different zones so that prices become more expensive in areas where power is in short supply, and cheaper in those where it is ample.
This market arrangement, known as zonal pricing, would make areas such as Scotland a hotspot for AI datacentres – which use vast amounts of electricity – because of an abundance of windfarms and low population density, according to the report by the Social Market Foundation (SMF) thinktank.
Keir Starmer said last month that artificial intelligence would be 'mainlined into the veins' of the nation after putting in place a sweeping action plan to make the UK a world leader in the technology.
However, the plans to host datacentres have attracted some scepticism, in part because the UK has some of the highest industrial electricity prices in the world and is pressing targets to virtually eliminate fossil fuels from the power system by the end of the decade.
The SMF report pointed to research by the tech-focused energy supplier Octopus Energy that claimed zonal pricing would mean a datacentre in Aberdeen would have electricity costs 65% lower than one in Slough, and make Scotland's electricity prices the lowest in Europe.
The backing for zonal pricing is among a range of measures put forward by the cross-party thinktank to accelerate the rollout of AI datacentres, including steps to connect more low-carbon electricity to the grid at pace and fix planning delays.
The report has also backed the government's plan, set out last week, to allow small modular reactors (SMRs) to be built outside the UK's legacy nuclear power zones to help power the rollout of datacentre hubs across England and Wales.
Sam Robinson, a senior researcher at the SMF, said: 'Datacentres are the critical infrastructure that underpins the digital economy and emerging technologies like AI. Without urgent action to address skyrocketing energy costs and planning delays, the UK risks losing its position as a global leader in tech innovation and adoption.'
He added: 'A forward-thinking strategy that makes energy affordable, accelerates planning and boosts green energy investment is essential to securing our future as an AI superpower.'
The support for zonal pricing from the SMF and its tech company clients has emerged amid a government consultation on the future of the electricity market, which has divided opinion in the industry.
Supporters of the plan believe that different pricing zones could encourage high energy users such as datacentres and factories into areas of the country with low energy prices, creating new job opportunities beyond south-east England and making sure that windfarms in remote areas do not need to be turned off because of low demand to avoid overwhelming the local grid.
However, clean energy companies preparing to spend billions on building new wind and solar farms are concerned that the changes could make projects planned for remote areas of the country less profitable and put investments in clean energy at risk.
The government is expected to make a decision on how to proceed in the coming months.