What Reformed National Pricing means for energy investment and why location still matters

Reshaping energy investment decisions across Great Britain's power system

The decision to retain a single national wholesale electricity price has brought certainty to one of the energy sector's most divisive debates. What happens next will have important implications for where generation, storage and major electricity users choose to invest, says Mott MacDonald electrical engineer Doga Can Tanrikulu.

A year on from the government’s decision to rule out zonal pricing for electricity, focus has turned to what alternative Reformed National Pricing (RNP) means in practice and how that will shape energy investment. While Great Britain will retain a single national wholesale electricity price, the government's reform programme is designed to strengthen locational signals through planning, connections and network charging arrangements.

Mott MacDonald’s experience of working with energy developers, investors and major electricity users shows that location remains a critical factor in determining project viability, even if it will not be reflected in wholesale market prices. That experience has given our teams a detailed understanding of the emerging RNP framework and why it is increasingly important as investment decisions are made.

Why geography remains a key factor

A fundamental challenge facing Great Britain's electricity system is that some of its strongest renewable energy resources are concentrated in Scotland and northern regions, while a significant proportion of demand is located further south. Over recent years, generation capacity, particularly renewables, has expanded faster than the transmission infrastructure needed to deliver power to end-users. As a result, the National Energy System Operator (NESO) has frequently had to pay wind generators to reduce output in constrained regions while turning on alternative generation closer to demand centres.

Major HVDC transmission links, like Eastern Green Link 3 and 4 between Scotland and England, are being built to address the geographic mismatch between renewable generation and demand but the question over zonal pricing remained.

However, rather than attempting to solve these issues through regional electricity prices, RNP aims to ensure that generation, storage and networks are developed in the right places, at the right time and at the lowest overall system cost. Locational signals remain central to government thinking and will be embedded within strategic planning, the connections process and network charging reforms.

For developers, investors and major electricity users, the practical implication is that location continues to influence project viability even without regional wholesale prices. Decisions about where new generation, storage and demand are developed could increasingly affect connection opportunities, network costs and the ability to align with future system priorities.

Delivering RNP: the plan and the levers

As NESO takes on a more influential role in shaping future investment decisions, strategic planning is expected to become a much more important driver of how the electricity system develops. At the centre of this approach sits the Strategic Spatial Energy Plan (SSEP), a long-term blueprint being developed to determine how much generation and storage should be built, what technologies should be prioritised and where investment should be directed. A draft plan is expected to go to consultation in early 2027, covering 19 onshore and 19 offshore zones, with the final version scheduled for publication later that year.

Although many of the detailed arrangements remain under development, future investment decisions are likely to be influenced by a more coordinated view of how generation, storage, networks and demand should evolve across Great Britain. Connections reforms and network charging changes are expected to play a particularly important role in shaping where infrastructure is developed, supported by strategic planning, transmission upgrades and seabed leasing reforms.

Managing constraint costs

As renewable generation continues to grow, reducing constraint costs has become a major priority for the government. The reforms are therefore accompanied by a wider programme aimed at improving network efficiency and making better use of available infrastructure. Measures currently being considered include accelerating transmission upgrades, deploying technologies such as dynamic line rating and encouraging greater participation from flexible demand and energy storage providers.

The growing need for more data centres illustrates how the reforms extend beyond electricity generation. As demand from artificial intelligence and digital infrastructure grows, policymakers are exploring incentives that encourage large consumers to locate where network capacity and renewable generation are most readily available, helping to reduce constraints across the wider system.

Implications for new projects

While the overall direction of travel is now clearer, many elements of RNP remain under development and will continue to evolve through consultations and further policy decisions over the coming years. For organisations making long-term investment decisions today, understanding emerging reforms may be just as important as understanding the final framework itself.

Renewable energy developers are likely to feel the most immediate impacts, but they will not be the only stakeholders affected. Investors, transmission network owners, storage developers, data centre operators and other large electricity users will all need to understand how evolving locational incentives could influence future investment decisions and operating costs.

Proposed reforms to the connections regime, including potential capacity thresholds, are likely to influence where and when projects are able to connect to the grid. At the same time, changes to network charging arrangements, particularly Transmission Network Use of System (TNUoS) charges, could materially affect project economics and investment returns.

How can organisations prepare?

While key aspects of RNP remain under development, organisations can already assess how potential reforms may affect siting decisions, connection strategies and long-term project economics. For developers and investors, understanding the direction of travel now may reduce future risk and help identify opportunities as the framework evolves.

At Mott MacDonald, we have helped clients understand how changing electricity market arrangements can affect their projects. From early-stage market assessments and feasibility studies through to detailed delivery support, our teams have helped organisations navigate uncertainty and respond proactively to emerging regulatory and market developments. This work has created practical experience on major transmission reinforcements, HVDC links, grid connections, renewables, storage and data centre energy infrastructure through projects such as National Grid’s Eastern Green Link, SeaLink, Norwich to Tilbury, Yorkshire Green and London Power Tunnels 2.

While many elements of RNP will continue to evolve over the coming years, organisations do not need to wait for every detail to be finalised before assessing the implications. Developers, investors and major electricity users should review how the changes could affect siting decisions, connection strategies and long-term project economics, and engage early with the policy developments that will shape Great Britain's future electricity system.