UK rules out zonal energy pricing move

LONDON (Reuters) -Britain's government will not move to a zonal system for wholesale energy prices but instead seek to take greater control of the planning process to determine where clean energy infrastructure is built.

Britain, which has some of the highest electricity costs in the world, is grappling with how to build new generation in the form of wind or solar farms and transport it to where it is needed across the country.

It had considered breaking the country into zones, with a price based on supply and demand, in the hope it would incentivise businesses to locate nearer to renewable energy sources, potentially cutting the cost of transmission.

Instead it announced reforms on Thursday that it said would seek to spread out the building of new energy projects around the country, give investors more confidence on where to build and when, and speed up the time it takes to get connections to the power grid.

"Our package of reforms will protect consumers and secure investment as we drive to deliver our clean power mission," energy minister Ed Miliband said in the statement.

The planned changes, which his department says will bring down energy bills, will see the government take on more responsibility for planning the system.

As part of a drive to "rewire Britain and upgrade the country's outdated infrastructure", it is also seeking to reduce the amount it has to pay in constraint payments - compensation paid to electricity generators when they are required to reduce output due to grid limitations.

The National Energy System Operator (NESO) estimates that up to 4 billion pounds ($5.4 billion) in constraint payments could be avoided by 2030, if upgrades are completed, the statement said.

($1 = 0.7349 pounds)

(Reporting by Muvija M and Kate Holton, editing by Sarah Young)