The grid is being redesigned to charge you for where you are

Why this matters

The quietest killer in an early-stage remote-energy model is a single assumption: that the delivered cost of grid power stays roughly flat. It is easy to type, rarely challenged, and increasingly wrong. This note is my attempt to make that assumption explicit — because for the mines, remote communities and weak-grid industrial sites Heliovulcan screens, the trajectory of delivered energy cost is often more decisive than the headline wholesale price everyone quotes.

The through-line is simple: electricity market reform, everywhere, is moving to stop hiding the cost of location and start charging it to the places that are expensive to serve. If your postcode is remote, you are on the wrong side of that curve.

The number that starts the argument

That £800 million Britain spent in 2021 — paying mostly-subsidised wind to switch off, and paying gas elsewhere to switch on to replace it — was equivalent to enough electricity to power around 800,000 homes, thrown away. Not an anomaly: total congestion cost has risen roughly twenty-fold in twenty years, paid by consumers. Every market with a lot of renewables and not enough transmission is on the same curve. Australia is on it too.

What locational pricing actually is

Most markets were designed around a handful of big, dispatchable stations turned up and down to follow demand. A single national price — or, in the NEM, a single regional price — papers over geography, quoting one wholesale number as if power could teleport from a remote windfarm to a distant factory at no cost. It can’t. The cost of moving it — and of not being able to move it — is real; it just gets socialised across everyone’s bill instead of being shown on the map.

Locational pricing makes that geography visible, in two strengths:

• Zonal pricing splits a country into a handful of price zones (Norway, Sweden, Italy). This is what Britain is debating.
• Nodal pricing / LMP prices electricity at every node — hundreds or thousands of prices (ERCOT and most US markets). The price at each point reflects exactly what it costs to deliver one more unit of power there, including losses and congestion.

The principle is identical at both strengths: where the grid is constrained, power is worth less to inject and costs more to consume.

Two signals — and the one that reaches a developer

There are two signals buried in this debate. The operational signal tells assets when to run. The investment signal tells capital where to build — the data centre, the electrolyser, the factory, the battery. In a locational market that investment signal is a price you can see and hedge; investors already do exactly that in ERCOT, Norway and Sweden. In a national/regional market it is supposed to arrive through network charges instead — but those have never been very effective, and they behave like an unpredictable tax you cannot hedge.

Australia is already living the physics

Australia is not debating full LMP today, but it has locational cost signals already — partial, and for remote sites, unforgiving:

• Marginal Loss Factors already penalise remote generation. The NEM discounts a generator’s output for the losses in shipping it to the regional reference node. Remote solar and wind have repeatedly seen MLFs cut effective revenue after financial close — a locational price signal in all but name, landing hardest at the grid edge.
• Congestion is the NEM’s version of the same crisis. Renewable Energy Zones are being built faster than the transmission to evacuate them; curtailment and negative prices are rising in export-constrained regions.
• The reform direction is more locational exposure, not less — through transmission-access reform, congestion-management proposals and REZ-specific arrangements. Whichever mechanism wins, it prices geography more sharply than today’s single regional price.

For a consumer at the end of a long feeder — a mine, a remote community, a weak-network industrial site — delivered cost is wholesale plus losses plus network charges plus the socialised cost of all that congestion. Every component is rising, and every one is higher the further you are from the grid’s strong core.

The conclusion for remote and industrial users

Locational pricing is not a threat that might arrive. In the form of loss factors, network charges and constraint costs, it is already here and strengthening every year. For anyone who owns or develops energy at the grid edge, the strategic reading is straightforward:

1. Do not underwrite the project on flat, cheap grid power. The market is being deliberately redesigned so it isn’t. Model a rising real cost of imported energy, not a constant one.
2. Behind-the-meter generation and storage rise in value with every step toward locational pricing. Solar + BESS (plus firming) generated and consumed on site sidesteps losses, congestion and network charges entirely — the exact components locational reform is designed to enlarge.
3. Energy self-sufficiency is a cost-of-location strategy, not a green preference. The more honest the grid becomes about what it costs to serve a remote site, the more a self-sufficient hybrid system becomes the lower-risk position. The question shifts from “can we get a grid connection?” to “how much of our load should we insulate from a grid that is about to price our postcode properly?”

The Pre-DD takeaway