The new British government has taken a fresh approach to planning policy – local authorities are being forced to zone more land for housing, and there will be pressures to take this route in Ireland. There is a second area, this time in energy policy, where the same pattern could unfold.

The UK has been levying for lower charges on carbon emissions in the electricity industry than those that apply in the common EU system, and the disparity has been enough to drive a spike in electricity imports across the interconnectors, creating a spurious fall in Irish emissions earlier this year.

A proper transnational market in electricity requires alignment of carbon charges, and the UK has good reason to take the hint – the UK has been unfairly debited with extra emissions, and Ireland with fewer, because of the curious way in which they are calculated.

There is a separate debate underway about reforming the power market and it concerns zonal pricing. Many countries have uniform national prices to cover the costs of generation, transmission and distribution, and both Ireland and the UK have followed the same model.

But it is no longer fit for purpose, and it looks as if the UK will make some important changes.

A unit of electricity generated on the system and consumed somewhere else does not cost the same, since the costs of transmission and distribution can vary enormously. Large new loads need a price signal to locate where the cost of reaching them is least.

The costs of generation vary too – some power station technologies are more costly than others. Prime minister Keir Starmer told an MP from the Shetland Islands three weeks ago that Shetland consumers should not face UK national prices since they host the UK’s largest onshore wind farm.

Refused connection

In Ireland, new data centres, voracious consumers of electric power, are being refused connections in the Dublin area by Eirgrid – the connection charge is infinite, which is what a flat refusal means – because the grid in the Dublin area cannot support extra volume.

Eirgrid has been complaining for years that it has become too difficult to secure planning permission for new power lines around the country. The issue has been discussed in recent reports from the Irish Academy of Engineering which highlights the need to rebuild large parts of the transmission grid.

The lines are sometimes in the wrong place – built decades ago to take high-voltage power from fossil fuel generating stations no longer in use or due to be phased out. New generation will include additional wind and solar in dispersed locations, which means reconfiguration of the transmission grid.

In his recent report on European competitiveness, former ECB president Mario Draghi has argued for zonal pricing in the EU and some US states have already moved in this direction.

Would-be generators of Irish offshore power are lobbying for State support and reticent about paying for the extra costs of connection. Deepening the European market for wholesale power means greater interconnector investment, and the European Commission accepts that more needs to be done.

The low-voltage distribution system in residential areas may also need upgrading as household power demand is growing – home chargers along every street will pose a challenge to capacity.

Someone has to pay for all this, and at present it is an across-the-board charge on Irish consumers, already paying high prices by European standards.

New system

If the new generation and transmission system that must emerge is to be efficient and minimise costs, both generators and consumers need price signals to choose the right locations.

In Britain the renewables industry is divided, with some feeling that the current regime favours those with advantageous locations and is helpful to those lobbying for preferential treatment.

Any change to the current uniform system must create winners and losers, since the electricity industry seeks to recover aggregate operating and capital costs from customers.

There has been scaremongering about the creation of a ‘postcode lottery’ and unfairness, with customers facing different prices in the various regions.

In Ireland, customers in rural areas enjoy an element of cross-subsidy through connection charges which recover less than the full cost of reaching low-density housing.

Potentially even more significant is the push for offshore generation from windfarms in the Atlantic, including some more distant locations, where somebody has to pay for undersea linkages to land and onwards to under-supplied markets, mainly on the east coast or for export.

There could be bills running into the billions. Should a zonal differentiation come to be introduced in the European Union as Draghi has recommended, or in Britain as the government seems keen to consider, there will be a knock-on effect here in Ireland and plentiful scope for grandstanding by local politicians. It may not happen soon, but zonal pricing is on the agenda.