Why now is not the time for locational marginal pricing of electricity

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27 September, 2023


The government is considering radical, structural change to electricity markets by introducing new ‘locational marginal pricing’ (LMP) to reflect the difference in the cost of supplying electricity to different areas.

This risks slowing down investment in necessary renewables construction and grid reinforcement. Our assessment is this would jeopardise expected energy transition savings which are up to nine times more than any benefits that could arise from locational electricity pricing.

Instead, we recommend exercising more caution and implementing alternatives which would improve the electricity system’s efficiency now, without risk to investment.

For more information

Liam Hardy, policy analyst, Green Alliance

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