The other day I was discussing UK energy policy with an old friend, and I was forced into the realisation that intelligent people are capable of supporting the broad thrust of policies to which I am profoundly opposed. My friend is no climate alarmist, nor a net zero zealot, but he believes, if I have the gist of his arguments correctly, that greater use of renewable energy will enhance the UK’s energy security; that renewable energy isn’t particularly more expensive than fossil fuels, and may be cheaper; and that given that much of the cost of moving to renewables has already been incurred, the additional costs that have yet to be incurred aren’t overly onerous. He relied particularly – and seems to give credence to – the OBR assessment of costs yet to be incurred by the government in this respect. He didn’t accept my view that even if (which I don’t accept) net zero isn’t horrendously expensive, it will make our lives worse rather than better. He told me that Germany’s electricity costs are much higher than those in the UK. He thinks we need to wean ourselves off fossil fuels fairly quickly because the UK’s remaining supplies of oil and gas under the North Sea are fast declining and are very limited. When I mentioned recent Norwegian discoveries in the North Sea, he told me their big recent find was in the Barents Sea, and that the North Sea reserves are fast depleting.

The conversation was good for me. I suppose I spend far too much time talking, either in person or online, to people who largely agree with me about these issues. To be challenged by an intelligent friend with no particular axe to grind, with regard to issues which I thought were obvious, was a useful check. It has forced me to go back to basics. I set out below the result of my further thoughts and research.

Energy security

The first point I would concede is that for a nation to have a mix of energy sources makes sense, in principle at least. If one source is endangered, then the others might be able to see us through the difficulty that would cause. However, those diverse energy sources must complement each other, and not work against each other. There is an argument, which I find reasonably compelling, that giving unreliable and intermittent renewable energy primacy on the grid (as the UK does) makes life much more complicated – and expensive – for the companies that own and operate gas-fired power stations. They are expected to ramp up and down on demand, because (since we blew up our coal-fired power stations), gas is the only fuel that can generate electricity in this flexible way. My friend is keen that we add more nuclear to the mix (as, reluctantly, am I), but the thing about nuclear power is that it operates in a steady state way, and can’t compensate for the vagaries of intermittent renewable power production. More nuclear in the mix does offer greater energy security, but it can’t deal with the issue of the unreliability of renewable energy. The purported solution to that problem (in the absence of much gas in the electricity generation mix) is battery storage, but with the current state of battery technology, it provides no solution at all – horrendously expensive and likely to keep the lights on for no more than an hour or two.

Nevertheless, my view of renewables, in terms of the energy security debate (and ignoring my views on the damage they cause to the environment) is that up to a point they can form a useful part of the mix. Beyond that point they become disruptive and unhelpful and significantly add to the costs of our electricity (more on that below). It makes no sense to me to shift from significant (over-)reliance on one diminishing energy source (fossil fuels) to significant (over-)reliance on another diminishing fuel source (wind). Why do I say this? Firstly, I am concentrating on wind, because solar cannot provide much more than a modest supplement to our electricity needs, and it does so at times when demand is lowest. When domestic demand is at its highest (in winter; at breakfast time and in the evenings all the year round) solar power is least productive. If we are to rely in any meaningful way on renewable energy, then it is wind that we are seeking to rely on. Secondly, the problem with this is that the wind is increasingly failing to blow. Only this week we have experienced yet another “dunkelflaute” that has lasted for days on end. This is on top of several such events earlier this year, and in November last year. As I write (not the moment of posting the article), solar and wind are together producing just 5.4% of the UK’s electricity. Gas is producing 52.3%, and we are receiving a net 10.3% via the interconnectors. This differs little from (at the time of writing) the last day (gas at 57.6%; wind and solar just 8.2%) and week (gas at 57.3%; wind and solar a combined 13.4%). All figures are from the excellent iamkate website. I have written before about this problem here. But that’s not the only problem associated with relying on unreliable wind energy. The other is that wind speeds in the UK seem to be declining over time, rendering this form of electricity generation less and less efficient and useful. Official data, such as the “State of the UK Climate in 2024” confirms this to be the case:

The UK’s annual mean wind speed based on the HadUK-Grid dataset shows a downward trend through the 1980s and 1990s…[to the present day, as is evident from the accompanying graph].

Three years ago, the New Civil Engineer website published an article with the heading “What falling wind speeds mean for UK energy supplies”, and it contained some telling information:

Experts have called for development of a reliable method of storing renewable energy at scale after Met Office data showed the extent to which wind speeds are dropping…

…Released last week, the report found that the annual mean wind speed for 2021 was the second lowest over the last 50 years. The average wind speed recorded in the UK last year was about 8.6 knots, down from around 9.7 knots the prior year. …

…UK Energy Research Centre co-director Keith Bell said the key point from the data was the heavy fluctuation seen over time and by geographical location, meaning neither wind nor solar power could be relied on to consistently generate the electricity needed by the country….

…Low wind speeds were one factor that pushed the UK “very close” to a power supply shortfall during the intense July heatwave, according to a research body….

For more information regarding these unhelpful trends, see also Jit’s articles here and here. I also touched on it recently here. And I discussed related issues here.

Nevertheless, if we can reduce our dependence on other countries, which might not always be helpful, that is again, in principle, a good thing. The problem is that Mr Miliband and his acolytes don’t seem to have noticed who supplies most of the fossil fuels we use, and who we are most dependent on for renewable energy. According to the ONS as of three years ago (I am struggling to locate more up-to-date official data) the UK was self-reliant in 2021 to the extent of 50% of our gas supplies. Norway supplied 77% of gas imports, with other supplies coming from the USA, Qatar and Russia. I trust we have now ditched supplies from the latter. Similarly, Norway was far and away the main supplier of our oil imports. And while some people may have understandable misgivings about any form of reliance on a country led by President Trump, it seems safe to say that we are not to any significant extent dependent on “fossil fuel dictators” as Mr Miliband would have us believe.

In an attempt to update my statistics, I have stumbled on the Sunsave website. I concede that I don’t know how reliable it is, but as a website seeking to encourage the use of solar power, it seems unlikely to put a positive spin on the situation regarding fossil fuel imports to the UK. It purports to be up to date as of 30^th April 2025. It says that domestic North Sea gas supplies 33.8% of our needs, Norway supplies 50.2%, and the US supplies 11%, these three sources, then, comprise 95% of the total. Not much sign of fossil fuel dictators there either.

When we turn to renewable energy, however, and particularly solar energy, we find ourselves heavily dependent on China. During the debate on the ethics of importing such products from China (particularly given allegations of Uighur slave labour) the BBC reported three months ago that 68% of solar panels imported into the UK last year came from China (and almost all of our solar panels are imported). That represented increasing, not reduced, dependence, since the figure for 2023 was 61%. The BBC said this data was based on official HMRC statistics. According to one website (others report in similar terms) “97% of the solar panels installed in the UK include polysilicon sourced from China”.

With regard to wind turbines, there seems to be a lack of transparency, as it’s difficult to track down any reliable figures. However, the government’s attempts via the Contracts for Difference regime (and the new Clean Industry Bonus (“CIB”) scheme) to increase the domestic supply chain seems to be an explicit acknowledgement of the fact that far from wind farms making our energy more secure, we are in fact heavily dependent on foreigners for this too. In its supporting blurb, it says this:

By offering extra CfD revenue support for supply chain improvements, the CIB ensures that the “lowest price wins” aspects of the CfD does not inhibit the supply chain investments we need to support our renewables deployment targets and reduce our reliance on polluting suppliers.

No doubt “extra CfD revenue support for supply chain improvements” translates as “yet more subsidies outwith the headline figures”. “Polluting suppliers” I take to be a euphemism for China.

Whatever one thinks of President Trump, he surely makes a valid point when he stresses that reliance on China is not a good thing. It’s certainly a highly topical issue just now. Here’s a very recent Telegraph headline: “US urges Starmer to block Chinese wind farm factory amid spy scandal – Republican warns against giving Beijing ‘even more leverage’ over Britain’s energy grid”.

And here’s the BBC not long ago:

“MI5 chief says China is daily threat to UK and voices frustration over spy case collapse”. I accept that the government recognises the threat and is taking (in my opinion fairly ineffectual) steps to reduce the UK’s dependence on China with regard to renewable energy, but in my opinion it should have built a sustainable UK-based industry manufacturing turbines and solar panels before rushing headlong down the renewables road.

Beyond manufacture, however, there is another issue, namely that of sourcing the rare earths that are vital to the renewables future the government seeks for us. I have written about this before, but suffice it to say that China’s determined cornering of global supplies in this area doesn’t augur well for the supposed energy security that renewables will bestow upon us. In any event, don’t take my word for it. Here’s an extract from the House of Commons Foreign Affairs Committee’s report (“A rock and a hard place: building critical mineral resilience”) published in December 2023:

…Critical minerals, such as cobalt and lithium, are essential to modern technology, national security and the transition to a green economy. After years of trade liberalisation and confidence in a globalised free market to ensure economic security, the UK now finds itself caught between the threat of economic coercion from hostile states and a shift towards protectionism amongst the UK’s allies...

...The 18 minerals on the UK’s critical mineral list are heavily concentrated in specific geographic areas. Several are mined predominantly in a single country—for example Brazil produces 98% of the world’s active niobium reserve. The majority of global cobalt mining is in the Democratic Republic of Congo, and Russia has significant palladium deposits. China is the primary producer of 12 of the 18 minerals that the UK identifies as critical…

…the key driver behind the current surge in global interest is that these materials are intrinsic to green transition technologies. Lithium, graphite, cobalt and nickel are needed in vast quantities to make the electric car batteries that will form the future of the global car industry. Wind turbines depend on permanent magnets, built with rare earth elements (REEs) and copper. Without these minerals, the UK cannot meet its legally-binding net zero target, support job creation in the tech and automotive industries, nor retain critical defence and security capabilities. Our economic resilience and national security depend on critical minerals….

…The UK is almost completely dependent on imports for critical minerals and mineral products. It currently lacks the necessary mines to be self-sufficient and faces many obstacles to developing them. Existing mineral deposits within the UK, even if exploited, would take years to produce a yield. This means that, for decades to come, the country will remain entirely reliant on global supply chains that are under increasing pressure from other countries scrambling to access the same limited resources. More concerning, the UK will remain dependent primarily on China as the dominant global player in these supply chains.….

There is much more in similar vein, and it makes for uncomfortable reading. It doesn’t look as though driving urgently down the renewables road is enhancing our energy security, given these fundamental problems. By strange coincidence, the BBC has recently reported on another UK failure in this regard – the headline (“Major UK rare earths refinery scrapped in favour of US”) says it all. Apparently a company called Pensana has spent seven years developing a rare earths mine in Angola. It had planned to build a refinery at the Saltend Chemicals Plant near Hull, which would have processed the raw materials into metals used to create powerful magnets. These magnets would then be used in high-tech applications such as motors for electric vehicles, wind turbines and robotics. According to the BBC, the project would have given the UK a strategic foothold in the rare earths industry, which is currently dominated by China. However, the plan has now been dropped. The BBC says that, according to Pensana, China has in recent years used its market power to keep prices artificially low in order to stifle potential competition – and this has made refining in the UK uneconomic without significant government support. When questioned about the rare earths issue, the best Rachel Reeves could come up with was a comment that she was working with G7 counterparts “on our own critical minerals strategy, so that we are less reliant.” That doesn’t sound much like the road to energy security to me.

Is China our friend? Can we rely on the Chinese if the chips are down? Hot off the press from the BBC website: “China warns UK of ‘consequences’ over mega-embassy delays”. That doesn’t sound very friendly, and the Chinese don’t sound like the sort of people we should be making ourselves increasingly reliant on in preference to, say, the Norwegians.

There is another issue too. In an increasingly globalised world, one where UK governments of all stripes since the days of Thatcher’s privatisations have opted out of public ownership of vital infrastructure, we find that ours is increasingly in the hands of foreigners (including the Chinese). The growth of renewable energy in the UK involves increasing reliance on foreign-owned energy companies, with adverse implications for balance of payments and for energy security. I wrote about that here.

Some serious commenters worry about the prospect of blackouts and other pressures on the grid caused by rushing to dependence on renewables before the supporting infrastructure is in place. Again, hot off the press from the BBC we have a report of a salutary lesson from the Netherlands, with this headline: “Netherlands’ renewables drive putting pressure on its power grid”.

An advertising campaign warns Dutch people that when they all use electricity at the same time, their power grid gets overloaded, and this can cause malfunctions. And so they are being encouraged to use as little electricity as possible between four and nine pm. As the BBC puts it: “It is the sign that, in one of the most-advanced economies in the world, something has gone wrong with the country’s power supply”. And what could have gone wrong? Well, we are told that the Dutch have been enthusiastic adopters of electric cars, with (on a per capita basis) the highest number of charging points in Europe. Also, they have replaced gas from its large North Sea reserves with wind and solar. It also has a 2030 target for wind energy to be predominant on its grid. This is putting the Dutch national electricity grid under enormous stress, and in recent years there have been a number of power cuts:

The problem is “grid congestion”, says Kees-Jan Rameau, chief executive of Dutch energy producer and supplier Eneco, 70% of whose electricity generation is now solar and wind.

“Grid congestion is like a traffic jam on the power grid. It’s caused by either too much power demand in a certain area, or too much power supply put onto the grid, more than the grid can handle.”

He explains that the problem is that the grid “was designed in the days when we had just a few very large, mainly gas-fired power plants”.

“So we built a grid with very big power lines close to those power plants, and increasingly smaller power lines as you got more towards the households….”

Sound familiar? It ought to be a warning, but it’s a warning that won’t be heeded by the current government. It certainly isn’t what energy security looks like.

Growing dependence on cables and interconnectors is another worrying aspect of the transition from fossil fuels to renewables. I first wrote, over four years ago, about the problems of relying on interconnectors, here. Since the Ukraine War, and Russia’s apparently increasingly nefarious and subversive activities, I suspect this issue should be assuming greater importance in the minds of planners than it is. My friend thinks that the interconnectors aren’t at such great risk as I fear them to be, and that if Russia starts cutting them, then we will be at war – in which case we would enjoy no greater energy security by relying on a gas-fired power station that could be bombed. I disagree. Cutting interconnectors can be done secretly, and is deniable. Bombing a gas-fired power station is rather more obvious.

If we want to enjoy energy security, then I return to my theme that a mix of energy sources makes the greatest sense. Going hell for leather for renewables, given the profound problems mentioned above, makes no sense, in energy security terms. Neither does refusing to allow new coal mines to open. According to Eurocoal:

The UK has identified hard coal resources of 3560 million tonnes, although total resources could be as large as 187 billion tonnes. About 80 million tonnes of the economically recoverable reserves are available in shallow deposits capable of being extracted by surface mining. There are also about 1000 million tonnes of lignite resources, mainly in Northern Ireland, although no lignite is mined at present.

How much oil and gas could be extracted from the UK’s reserves in the North Sea is a moot point, and the North Sea Transition Authority says (page 4):

Ultimately the Yet-toFind potential of the UK Continental Shelf will be determined by activity levels. The ultimate volume that can be delivered will depend critically on how industry generates new targets, the efficiency of resource progression from plays through to drill-ready prospects and the industry maintaining its ‘social licence to operate’.

Refusing new licences, however, makes no sense at all in terms of energy security. It certainly looks as though there may yet be significant discoveries to be made. I was not wrong when I said that Norway has recently made significant discoveries in the North Sea close to the UK sector. Here’s the Telegraph a couple of months ago: “Norway makes one of biggest North Sea discoveries in a decade – The oil find was in an area thought to have already been fully explored”.

The find was made in the Yggdrasil field, an area of the Norwegian North Sea close and geologically similar to that of the UK sector.

The issue of fracking for gas is controversial, as is the question of how much gas is available and how readily it could be extracted. Nevertheless, it is certainly known that significant quantities of gas are domestically available. Ed Miliband’s hubristic claim (does he not understand the concept of Parliamentary sovereignty?) to “ban fracking for good” makes neither constitutional sense nor sense in terms of UK energy security.

Before leaving the question of energy security, it’s worth touching on a related issue – food security. In March 2021, I noted an article in the Guardian with the title “The race to zero: can America reach net-zero emissions by 2050?”. It contained some snippets of information which a senior research engineer wheeled out by the Guardian described as an appealing vision, but which is my idea of hell:

If America finally weans itself off planet-heating emissions, the country will look and feel very different.

Landscapes from coast to coast would be transformed, carpeted in wind turbines and solar panels, with enough new transmission lines to wrap around Earth 19 times….

…A gargantuan effort [will be required] to erect solar panels and wind turbines – first an extra 300GW of wind and 300GW of solar by 2030, before supply soars further to five times today’s transmission capacity by 2050.

This endeavor [sic] will require around 590,000 sq km (or 227,800 sq miles) of America to be blanketed in turbines and panels, around a tenth of all the land in the contiguous US. If you took a stroll along an Atlantic-facing beach there would be a good chance you’d see renewable energy in all directions, with an expanse of ocean the size of Belgium dotted with towering offshore wind turbines.

… As solar and wind are intermittent, moving clean energy to all corners of the country will require the current electricity transmission system to triple in size, an extraordinary roll-out of new poles, wires and substations.

I have not seen any similar analysis for the UK, but on our smaller scale, that “vision” is already coming to pass. Huge swathes of the country are blanketed in wind turbines; a tsunami of applications has begun with regard to massive solar developments; and the power lines, pylons and BESS associated with the project are causing shock waves among communities up and down the country. We are constantly told that we have related climate and nature crises, but I fail to see how trying to “deal with” the first supposed one in this way can do anything other than exacerbate the second very real one. The related point, of course, is food security. As hundreds of thousands of acres of farm land disappear beneath Chinese-made solar panels, our food security diminishes. The UK Food Security Report 2024 makes a big thing about climate change affecting UK farming, yet manages to conclude (at page 130) that:

Despite the challenges posed by extreme weather events, geopolitics and a longterm decline in natural capital, domestic production has been able to keep up with population growth.

However, it also tells us (also at page 130) that:

A secure food supply provides enough nutrients as well as calories. To understand the nutritional component of supply, analysis is needed on what aspects of diet current supply is providing. Both research and consumer trends for the different food groups suggest the UK has high import dependency for its supply of micronutrients (like vitamins and minerals) from goods such as fruits and vegetables and fish, compared to its supply of macronutrients (like carbohydrates and proteins), and this dependency has increased over the last 50 years.

At page 124 we are told that:

Many of the countries the UK imports these foods from are subject to their own climate-related challenges and sustainability risks. Further research is required to understand the impact of climate change on the global production of fruits and vegetables.

Needless to say, the UK’s efforts to be a world-leader (sic) don’t seem to be having any impact on reducing global emissions or climate change, so reducing our stock of farmland for this purpose, thereby making us more reliant on countries whose food production is – we are told – at risk from climate change, makes no sense at all. Especially as we are told that (to date) UK food production has managed to keep up with population growth, but (page 127):

...risks on the global level such as reduced productivity growth pose challenges over the longer term.

Taking valuable agricultural land out of use for solar panels will exacerbate an existing problem. At page 181 we are told that:

In 2023, 133 thousand hectares of agricultural land in the UK were used to grow crops for bioenergy, this is a 9% increase on total area in 2020. In 2023 crops grown for bioenergy represented 2.2% of the arable land in the UK…

Also:

Some agri-environmental schemes (AES) have led to land being taken out of food and other crop production to support long-term biodiversity and sustainable production.

Returning, after that brief digression, to the Guardian article, we are told that supplying the US (and, by implication, the UK) with the renewable power supply and associated infrastructure will require a gargantuan effort. I assume that will also come at a gargantuan cost. This leads neatly into the next point my friend and I discussed. Let’s take a look.

Costs

The costs that need to be discussed fall into two overlapping parts: the cost to the government/taxpayer; and the cost to the consumer (whether domestic or industrial) of electricity. Costs to the consumer (to date) are identifiable, as they are there for us all to see in our bills, though what the future might hold under different scenarios is less certain. Cost to the government/taxpayer is a much more difficult issue. There are so many different numbers out there, based on competing assumptions, that it is difficult to sort the wheat from the chaff. My starting point is to mistrust any financial modelling emanating from the current government, since the two individuals within it most committed to net zero (the Prime Minister and the Secretary of State for Energy and Net Zero) both (when in opposition) gleefully seized on and gave credence to the lie that “renewables are nine times cheaper than gas”. They weren’t at the time, and they most certainly aren’t now. The claim was publicised by the Guardian (naturally) and emanated from Carbon Brief, an organisation that is largely funded by the European Climate Foundation, which, in turn, states that its aim is to create a net zero world. All of this is transparent and above-board, but it casts doubt in my mind on the reliability of information emanating from organisations that are certainly not disinterested and which actively push an agenda. The fact that leading members of the current government preferred to seize on and prominently publicise claims made by a lobbying organisation, rather than to analyse and question them, worries me greatly. Be that as it may, there are a number of financial analyses in play, and all should be considered, along with any issues I have noticed that are generally overlooked.

Cost to the government/taxpayer

My friend’s starting point is to acknowledge that a lot of mistakes have been made to date, and that the taxpayer is already on the hook for significant ongoing subsidies in the form of feed-in tariffs and renewable obligation certificates. This is unfortunate, he says, but it is what it is. Given the undesirability – for obvious policy reasons – of tearing up existing government contracts, we are saddled with those costs until the late 2030s. Much of the case against renewables and net zero is based on the high cost of subsidies for renewables but, my friend argues, what we should be analysing is the question of any new costs from here on in. We can do nothing about what is locked in. The intelligent and meaningful question is as to what will a shift to renewables cost us from where we are now, and how does that differ from the cost of, say, having to build a fleet of new gas-fired turbines, given that many of the existing ones are coming to the end of their useful lives (in much the same way that some of our nuclear power stations are on their last legs). Relying on the most recent OBR assessment my friend argues that we are probably talking about an additional cost to the government/taxpayer of around £110 billion. He acknowledges that this is not an insignificant sum, but that it is to be spread over 25 years, and is therefore eminently manageable, especially in the context of an annual government budget of c. £1.2 trillion and bearing in mind that (as he puts it) the cost of supporting individuals and businesses from the worst consequences of the Ukraine war was £78bn in less than two years and we got nothing for it.

Put like that, it’s quite a powerful argument. Is it broadly correct, or should it be refuted?

If we wind the clock back six years to what seems like a completely different era, Philip Hammond, when Chancellor of the Exchequer, warned Theresa May (then seeking to amend the Climate Change Act to introduce the now infamous concept of net zero) that her plans could cost £1 trillion. A fascinating BBC article from the time demonstrates that there are a number of different ways of looking at the figures. They were in play then, and not a lot seems to have changed since.

The first rebuttal to the claim, as noted in the article, was simply pathetic (in fairness to my friend, it’s not an argument he seeks to rely on):

A No 10 spokeswoman said there were “a lot of figures out there on this issue that don’t factor in the benefits or consider the costs of not doing this”.

This is a common argument relied on by net zero zealots, but it’s not founded in reality. First, it makes the assumption that there is a climate crisis (John McDonnell, then Shadow Chancellor is reported as saying “We are facing a climate emergency and Philip Hammond clearly doesn’t get it”). Then, it assumes that unilateral action by the UK can protect the UK from the costs said to be associated with the crisis, and bestow benefits on us by “dealing with” it (John McDonnell again, though it could just as easily be Ed Miliband: “the chancellor is creating obstacles to prevent the action we desperately need to take”. See also the No. 10 spokeswoman reported above. See also Ed Davey: “The cost of tackling the climate emergency is massively outweighed by the long term cost of not acting. The chancellor has got his sums wrong.”). Given that the UK is responsible for just over 0.7% of global greenhouse gas emissions on an ongoing basis, and that the emissions of the rest of the world increase every year by more than the whole of the UK’s emissions, such arguments are facile.

There is another point here. The Impact Assessment to the Climate Change Act 2008 acknowledged (even before the 80% emissions reduction target was amended to 100% – net zero) that if the rest of the world didn’t follow suit, then it would be all down-side for the UK, with no up-side. It was signed off by Ed Miliband, at the time, but he seems to have forgotten what it said (on page 7):

It should be noted that the benefits of reduced carbon emissions have been valued using the social cost of carbon which estimates the avoided global damages from reduced UK emissions. The benefits of UK action will be distributed across the globe. In the case where the UK acts in concert with other countries then the UK will benefit from other nations reduced emissions and would be expected to experience a large net benefit. Where the UK acts alone, though there would be a net benefit for the world as a whole the UK would bear all the cost of the action and would not experience any benefit from reciprocal reductions elsewhere. The economic case for the UK continuing to act alone where global action cannot be achieved would be weak.

The OBR says much the same:

At a global level, investing in mitigation strategies which lower the net flow of emissions can reduce the future costs of damage and the need for adaptation. However, for countries like the UK which account for a relatively small share of global emissions, the ultimate extent of climate-related damage is much more affected by the decisions of other larger emitters.

One wonders what is the point of a legislative Impact Assessment if it is never re-visited and if its contents are ignored (as is the case with the Climate Change Act).

The next argument deployed, then as now, is one which my friend, relying on the OBR analysis, does endorse (if I have understood him correctly). Back to the unnamed NO. 10 spokeswoman in 2019:

The costs relating to meeting this target are whole-of-economy costs, not a fiscal cost, and so it’s not really right to frame it as a trade-off for public spending.

It’s a neat argument, because it makes the cost seem to be so much more manageable, by reducing it to the cost to the government/taxpayer, and ignoring the cost to the economy as a whole. But I would argue that it’s the cost to the economy as a whole that matters. Whether we pay these costs through our taxes, through higher energy bills, through everything we buy becoming more expensive, due to businesses passing the additional costs on to consumers, or through a combination of all three, they are still real costs, and the net effect of incurring them is still to make us all poorer, and to make business less competitive internationally.

What’s curious also is how the Climate Change Committee (CCC) has shifted its ground in the intervening six years. Remember that my friend, relying on the OBR, puts the cost to the government at £110 billion over 25 years – or around £4.4 billion per annum over that period? Here’s how the BBC reported on the CCC’s contribution to the debate at the time:

The CCC, which is the independent adviser to government on climate change, put the cost at £50bn a year.

Got that? Cost to the government. It is also reported as saying:

…while the UK would not be able to hit “net zero” emissions any sooner, 2050 was still an extremely significant goal.

By implication, then, the CCC was putting the cost to the government at £50bn p.a. all the way out to 2050. It seemed to be endorsing, not undermining, Philip Hammond’s claim that “On the basis of these estimates, the total cost of transitioning to a zero-carbon economy is likely to be well in excess of £1tn.”

The reality is that the CCC now purports to be massively more optimistic regarding the cost of net zero than it was just a few short years ago. I don’t believe it’s new-found optimism, based on a series of dodgy assumptions to be justified (more on that below).

BBC analysis (never known to be less than enthusiastic about net zero) in that article, just six years ago, broadly supported the £1 trillion figure:

The Committee on Climate Change puts the cost of achieving net zero greenhouse gas emissions by 2050 at between 1% and 2% of GDP – the total output of the UK economy – a year.

GDP is currently about £2tn a year, so, at the moment, that amount would be between £20bn and £40bn.

Remember, this isn’t all government spending – things like transport and power generation could get more expensive, which would increase bills.

The CCC reckons the cost will be about £50bn a year in 2050, but will be less in the early years of the transition.

Still, you can see how those figures could reach a total of £1tn over 30 years.

The letter also refers to a figure of £70bn a year from the Department for Business, Energy and Industrial Strategy – although the department has declined to comment on whether it has actually come up with that figure.

Either something has changed dramatically, or the establishment is now torturing the figures to supply the answer it wants.

Let’s, then, take a look at the OBR analysis. The main thing to note about the OBR’s July 2025 report is that it isn’t in fact a report on the cost of net zero at all. Rather, it is a report on fiscal risks and sustainability (FRS). As explained in the foreword:

In this FRS we focus on three areas of risk to the long-term fiscal outlook: the sustainability of UK’s system of public and private pensions; the performance of the government’s financial balance sheet and the risks around the new target for public sector net financial liabilities; and the potential economic and fiscal costs of climate-related damage and mitigation. We also update our fiscal risk register.

Chapter 4 deals with climate change, with fairly lengthy sections addressing global emissions and temperature paths; economic damage estimates; and fiscal costs of climate damage. Only pages 105-116 deal with the fiscal costs of climate change mitigation and risks around those estimates. Those pages draw heavily on the work of the Climate Change Committee (described by the OBR as “an independent body providing expert advice to the government on reducing emissions and adapting to climate change”, but in reality comprised of net zero enthusiasts, many of whom have close links to renewables companies). It’s also worth noting that the OBR itself recognises that there are massive uncertainties here: “Given the uncertainty around numerous aspects of these projections, we also explored a range of alternative scenarios”.

In reality, the OBR seems to have done very little – if anything – by way of cross-checking the work of the CCC. Rather, it seems to incorporate the CCC’s latest report into its financial assumptions:

As with the 2021 FRR we have used the CCC’s whole-economy costs of transition as a basis for our analysis.

In this regard, paragraph 4.20 is particularly significant:

The CCC’s latest estimates of the whole-economy cost of reaching net zero are significantly lower than its 2020 estimates. In its Seventh Carbon Budget ‘Balanced Pathway’, the net cost to the economy of reaching net zero is estimated to be £116 billion (in 2025 prices) over the 26 years from 2025 to 2050. Compared to the CCC’s Sixth Carbon Budget, this is a reduction of £204 billion (in 2025 prices) over the 2025-2050 period. This is due to faster falls in the costs of some renewable technologies, higher projected gas prices in the near term (which reduce the marginal cost of switching to alternatives), and some changes to CCC modelling assumptions. This net cost is comprised of £720 billion of capital costs (mostly in renewable energy and heating systems), partly offset by £604 billion of operational savings (largely coming from electric vehicles).

Reading the OBR report, it’s perfectly apparent that it simply parrots the CCC’s numbers. Paragraph 4.24 is quite revealing, suggesting that where the CCC offers up a range of costs from low to high, the OBR just settles for the middle:

In the CCC’s Seventh Carbon Budget advice it has, for the first time, produced ‘high’ and ‘low’ scenarios for the government’s share of whole-economy investment costs in the balanced pathway. We use the mid-point of these scenarios to estimate public sector investment costs in our central scenario (Chart 4.9). On this basis, we estimate total public sector investment over the 26 years to 2050 at £257 billion (2025 terms), a 36 per cent share of the CCC’s £720 billion estimated whole-economy capital investment costs. This averages at £9.9 billion a year (0.3 per cent of GDP). In the CCC’s low public investment scenario, average annual public investment costs are £4.8 billion a year in today’s terms (0.2 per cent of GDP). In the high public investment scenario, average investment costs are £15.0 billion a year (0.5 per cent of GDP). These represent 17 and 54 per cent of the estimated whole-economy investment costs, respectively.

I agree with my friend that the lost tax receipts (from ICE vehicles particularly) can be ignored. I do not categorise them as a cost of net zero, since it’s safe to assume that cash-strapped governments will seek to recoup those lost taxes with new ones (presumably on travel or on EVs). Nevertheless, while the section of the OBR report dealing with net zero costs is little more than a cut and paste of the CCC’s work, the part headed “Total costs of transition to net zero” contains enough to merit a raised eyebrow, especially at paragraph 4.31:

The total fiscal cost of the net zero transition in our central scenario is an estimated £803 billion, or £30 billion a year on average (0.8 per cent of GDP) (Chart 4.11). Around two thirds of this comes from lost receipts, and one-third from additional spending.

How casually the CCC (and thus the OBR) assumes falling costs:

The latest estimate (in real terms) of the fiscal costs of the transition to net zero based on the CCC’s Seventh Carbon Budget, set out above, is 21 per cent of GDP (£803 billion) by 2050-51. This is 9 per cent of GDP (£346 billion) less than the total cost (29 per cent of GDP or £1.1 trillion) estimated in our previous analysis in the 2021 FRR…the latest estimate of the government share of additional spending on the transition, at 6 per cent of GDP, is around 5 percentage points lower than the equivalent figure of 11 per cent of GDP in the 2021 FRR early action scenario.

Box 4.3 of the OBR report is, I think, close to devastating:

As with climate change damage, there is considerable uncertainty around the economic and fiscal costs associated with climate change mitigation. The significant 65 per cent downward revision to the CCC’s estimates of the costs of net zero between their Sixth and Seventh Carbon Budgets illustrates this uncertainty…Renewables provide variable energy, unlike the dispatchable power provided by fossil fuel energy sources such as a gas-fired power plant. This means greater generation capacity is needed alongside additional sources of energy storage. Additionally, renewable energy generation is geographically dispersed, with many more generators, and therefore more connections to the grid. While the CCC has included network costs in its estimates, some evidence suggests the costs could be higher…

When it comes to establishing the cost of net zero to the government (as opposed to the economy as a whole, and all of us living in it who will bear those costs), one example will suffice as to how this exercise is fraught with difficulty and uncertainty. It really is a case of simply choosing to accept whichever numbers you like the look of. One short paragraph at the foot of page 108 deals with carbon capture and storage (CCS) (titled “removals” in the OBR report:

We assume the government covers 30 per cent of investment in removals, costing a total of £42.4 billion (2025 prices), or £1.6 billion a year (0.1 per cent of GDP). There is significant uncertainty around the costs of these technologies: the CCC’s low scenario estimates £14.5 billion in public investment, while its high scenario estimates £70.4 billion (a 51 per cent share of total investment costs). We assume that all CCS operational spending is covered by the private sector.

Is it £14.5 billion? Is it £70.4 billion? The OBR has no more idea than you or me, so says “let’s call it £42.4 billion”. The assumption that all CCS operational spending will be covered by the private sector is a fairly heroic one. Even then, we have the caveat:

But there is downside risk that key technologies turn out to be unviable at scale. For example, carbon capture and storage is little-developed and not yet scaled in the UK. International projects have cost more than expected, while the efficiency of the technology has failed to meet target levels of CO2 capture.

I have some sympathy with the OBR. Asking it to put a cost on the net zero transition is a bit like asking it how long is a piece of string. Nevertheless, the OBR has copped out, simply piggy-backing on the CCC’s (heavily biased) numbers. It does its best to make it clear that it acknowledges huge uncertainties in all aspects of these calculations, but its report amounts to little more than licking its finger, sticking it in the air, and making a guess.

If we are going to get to the bottom of the numbers more effectively than the OBR has tried to do, then it is necessary to take a look at the Climate Change Committee. Its Seventh Carbon Budget would be funny if it weren’t so serious, given that the numerous assumptions contained within it (and implicitly accepted by the OBR) bear very little relation to reality. It assumes that its 2040 targets will be achieved via five main routes (I look only at the most significant).

Electrification and low-carbon electricity supply make up the largest share of emissions reductions in our pathway, 60% by 2040.

In short, then, this aspect is critically important. Yet it requires “that the roll-out rates…for the uptake of electric vehicles (EVs), heat pumps, and renewables are similar to those previously achieved for mass-market roll-outs of mobile phones, refrigerators, and internet connections.” Yeah, right. It doesn’t seem to have noticed the extent of public reluctance (even with the subsidies on offer) to adopt EVs and heat pumps at scale. Mobile phones, refrigerators, and internet connections were seen by the public to make their lives better, and they were adopted en masse without the need for subsidies. The same cannot be said for EVs and heat pumps, and yet the CCC (and by implication the OBR) assume this to be the case. Regarding EVs, for instance, this is what is required to make the CCC’s numbers add up:

…by 2040, our Balanced Pathway sees three-quarters of cars and vans and nearly two-thirds of heavy goods vehicles (HGVs) on the road being electric, up from only 2.8% of cars and 1.4% of vans in 2023. The share of new car and van sales that are electric grows quickly, ahead of the zero-emission vehicle mandate [that’s the mandate that isn’t currently being met], reaching around 95% by 2030 and 100% by 2035. This is propelled by the falling cost of batteries, which allows electric cars to reach price parity with comparable petrol and diesel cars between 2026 and 2028 [close to the end of 2025 we are nowhere near price parity]. Our pathway assumes battery-electric vehicles are chosen to decarbonise all HGVs.

Good luck with that. What of heat pumps?

…by 2040, our Balanced Pathway sees around half of homes in the UK heated using a heat pump, compared to around 1% in 2023. This requires the annual rate of heat pump installations in existing residential properties to rise from 60,000 in 2023 to nearly 450,000 by 2030 and around 1.5 million by 2035.

Good luck with that too. Let’s be brutally honest – this is Cloud Cuckoo Land. And if their assumptions around public buy-in are based on fantasy, so are their assumptions regarding the costs of the transition. The lack of realism is evident throughout. How about this:

EVs will lead to a significant cost saving. Electric cars and vans are already generally cheaper to run and maintain, and will soon be cheaper to buy, than their fossil fuel-based alternatives. Households will see a significant reduction in the cost of driving.

Not many households have the benefit of a garage or drive with home-based overnight charging. For them, they have to rely on public chargers, which are still few-and-far-between, and are very expensive, with VAT charged at 20%. To the extent that EVs are cheaper to run, if at all, it’s largely due to favourable tax treatement. Once the government moves to fill the black hole identified by the OBR as being left by the loss of fuel duty on ICE vehicles, households most certainly will not see a significant reduction in the cost of driving.

Or this?

Heat pumps are around three-to-four times more efficient than gas boilers, which should lead to lower household energy bills, provided policy costs are removed from electricity bills. However, UK homes are predominantly designed around gas heating and will need a one-off improvement to be suitable for heat pumps in many cases. This is a sizeable element of the total cost of Net Zero, and households will need policy support with these one-off costs.

Note the proviso – shifting “policy costs” from electricity bills to general taxation does not make them go away. We still have to pay for them. Gas costs around one-quarter of the price of electricity. Gas central heating for most people – even before we consider the massive costs of preparing an existing property for a heat pump – is cheaper and more efficient than a heat pump. The claim that heat pumps are around three to four times more efficient than gas boilers is broadly true, but that simple statement ignores the reality that the claim represents an average over the course of the year. During the summer, when heat is little needed, they are at their most efficient, and during winter, when heat is most needed, they are at their least efficient. For many people, installing a heat pump will increase, not reduce, their bills. And that’s before the question of their needing support, as the CCC puts it, for the installation costs. Where is such “support” to come from? The taxpayer, in short. These are real costs. The CCC report is full of stuff like this.

I don’t propose to critique the CCC report on a line-by-line basis, as this article is more than long enough already. Interested readers might like to take a look at Paul Homewood’s website, where he has a number of pieces taking issue with the CCC’s sums, such as here and here. David Turver’s analysis is also well worth a read. As he points out:

They [the CCC] assume offshore wind costs £51/MWh in 2025, falling to £31/MWh in 2050 and solar costs at £46/MWh in 2025, falling to £27/MWh in 2050. Their figures for 2030 onwards are lower even than the Government’s generation cost report from 2023 which was hopelessly optimistic. Moreover, they seem to have relied on models for their assumptions rather than look at actual data from renewables auctions.

During my discussion with my friend, I put a figure of £3 trillion as my back-of-a-fag-packet calculation of the cost of net zero. I set out my thoughts in that regard just over three years ago here, but a lot of information came to light subsequently, and is noted in comments below the article. A quick summary of some of the main points (and costs) I then identified, follows. I ignore the costs that, thanks to political ineptitude and renewable energy companies’ avaricious rent-seeking, are already “locked-in”, since as my friend points out, we are already stuck with them. No use crying over spilt milk, and all that. Still, £16 billion on smart meters alone (to take just one example) is more than a little annoying, since many of the early ones installed have been found not to be compatible with more up-to-date requirements. But I digress.

UK Emissions Trading Scheme – approximately £10 billion per annum, back when I penned my article. I haven’t checked the up-to-date figure, but given the government’s “EU reset” and its desire to sign up to the EU’s Carbon Border Adjustment Mechanism (CBAM), this is a figure which I imagine will go up rather than down.

Net Zero “Just Transition Funds” in Scotland. Difficult to find a precise figure, but they seem to be running into billions.

National Grid upgrade. Some of this is maintenance of existing systems, but most of it is required only because renewable energy sources (especially wind farms) are built in far-flung locations. The figure of £54 billion was being bandied around at the time, but that has subsequently increased (and will no doubt continue to do so).

New hydro storage – £1 billion.

Replacing gas boilers with heat pumps – £40 billion.

Hydrogen. This one is up in the air, but figures in excess of £10 billion have been mentioned. How many people know there is a hydrogen allocation round, just like the Allocation Rounds under the Contracts for Difference scheme? At least £2 billion.

Blackout avoidance. Sometimes the National Grid has paid £4,000 per MWh, to keep the lights on. This is due to the failure of renewables. I don’t know what it adds to our bills, but it won’t be insignificant.

“Green” QUANGOs – c. £1 billion.

Balancing the energy system. This one is a wild card, but one estimate of the cost of using batteries rather than gas to balance the grid is £1 trillion. The annual cost on the current basis was £4.2 billion, last time I checked.

Greenhouse gas removal – as above. Lots of money – many £billions – but nobody knows exactly how much.

Constraints payments – upwards of £1 billion p.a, and rising.

Conversion of Scotland’s buildings to become “zero carbon”. £33 billion under Scottish government plans.

Electric vehicles – announced government subsidies run into the £billions to date.

Interconnectors – at least £5 billion from a quick scan of announcements about them to date.

Sadiq Khan says it will cost £75Bn to make London “carbon neutral”.

“De-carbonising” UK public buildings (per the BBC) – £25-30 billion.

From the same article: “It has estimated the total cost of decarbonising residential properties would require an investment of £250bn – equivalent to £9bn a year from the late 2020s to 2050.”

The Daily Sceptic might not be to my friend’s liking, but if he’s reading this, I would refer him to this article:

When National Grid ESO – the company which runs the electricity grid in Britain – attempted to calculate its own estimate of the cost of reaching Net Zero by 2050 it came up with an answer dramatically different to that of the CCC. In 2020 it presented four different scenarios of how Britain might attempt the transition, involving different blends of renewable energy, changes in consumer behaviour and so on. Its estimated costings in each case came out at around £160 billion a year of investment, eventually reaching a total of around £3 trillion. That was three times the figure which the CCC had touted just a year earlier – and National Grid was only trying to price up the decarbonisation of the energy sector, not agriculture and difficult-to-decarbonise sectors such as steel and cement. To MPs who had treated the CCC’s figure as gospel, and nodded through the 2050 target, it was a sharp reminder that they had committed the country to an open-ended bill, the eventual size of which no one could reasonably guess – other than to say it was going to be huge. Those MPs knew full well the Government’s lousy record on estimating costs of things we do know how to do – such as building a high-speed railway in the shape of HS2 from London to Birmingham, Manchester and Leeds, whose estimated costs nearly trebled from £37.5 billion in 2009 to £107 billion in 2019. Yet they had swallowed whole an attempt to put a price on doing something which had vastly more unknowns and which involved technologies yet to be invented or proved on a commercial scale.

I rest my case. Almost. What about my friend’s point about the cost of new gas-fired energy plants to replace the ageing fleet? If those costs can be avoided, then that saving must be factored into any assessment of the costs of net zero. I would agree, save for the fact that we need new gas plants anyway under net zero, so instead of saving those costs, we are duplicating them. Even Terra Firma Energy (“created with a vision of assisting the country on its journey to Net Zero in line with government policy that is focused on security of supply and a reduction in overall carbon emissions”) sees the problem:

Ed Miliband, the UK’s Energy Secretary, has instructed the National Energy System Operator (Neso) to ensure Britain has 40 gigawatts (GW) of back-up electricity generation in place by the end of the decade. This move is designed to guarantee power supply during periods when wind and solar output are low. Miliband’s directive opens the door for a new generation of gas-fired power stations across the UK. The majority of this backup capacity – enough to match the output of 35-40 large gas plants – is expected to come from gas….This initiative is part of the UK’s capacity market, a system where companies are paid to keep power stations ready for use when needed. The cost of this backup system is already £1.3 billion per year and could rise to £4 billion by 2030, according to the Office for Budget Responsibility….While these plants help to keep the grid stable, they add to consumer bills and create what experts call “two parallel electricity systems” – one renewable, the other fossil-fuelled.”

It was a lot cheaper and simpler when we only needed one system. You know, the old, reliable, one that didn’t need to be backed-up.

Cost to the consumer

With almost perfect timing, as I started writing this, two articles appeared in quick succession. The first is by David Turver, and is titled “Why Is My Energy Bill So High? And what to do about it.”

One of the key issues identified by my friend during our discussion was the difficulty of establishing a meaningful gas price. Firstly it’s variable, so pinning down a single price is difficult. Secondly, the price of purchasing gas doesn’t take into account the cost of fudning and running a gas-fired power station. Thirdly, we can’t refer to a mechanism such as allocation rounds under the Contracts for Difference mechanism and point, with confidence, to a known price per MWh. Well, Mr Turver attempts to make a meaningful analysis, though whether it will satisfy my friend, I don’t know. He (Turver) does draw attention to the Emissions Trading Scheme, which I mentioned above, when seeking to mention some of the more significant costs associated with net zero. Using data from Ember (net zero enthusiasts, established by an author of the Climate Change Act, so sceptics of net zero scepticism might reasonably rely on data from Ember) he notes:

In August 2025, they estimate fuel costs of £54.67/MWh and carbon costs of £25.77/MWh or 32% of the total. The CPS is a straightforward Carbon Tax levied at £18 per tonne of carbon dioxide. The ETS cost varies and has been increasing recently from about £30/tCO2 in January to about £55/tCO2 today. The increase is due to the Labour Government announcing that the UK ETS will align with the EU scheme.

Whatever the merits of carbon taxes, all this artifically inflates the cost of gas, and thereby adds to all of our bills, whether gas bills, or electricity bills where the cost of gas is playing a part.

Mr Turver draws attention to the movement in offer prices between the CfD allocation rounds 6 and 7 (fixed offshore wind up 11%; floating offshore wind up 10.2%; onshore wind up 3.1%; solar down 11.5%). He says that “All [AR7] prices are much higher than the current price of gas-fired electricity unencumbered by carbon costs.” Of course, these are the prices on offer from the government. We don’t yet know (and won’t know possibly for a few months yet) the outcome of AR7. If it’s successful, in the government’s terms, (i.e. if there is substantial uptake at or below the prices on offer), then my friend’s optimism will look more justified than my pessimism. If, on the other hand, it flops as AR5 did (at lower prices), with the result that the government’s plans to expand renewables are left in trouble unless it puts more money on the table, then my pessimism would be justified. This is one area where my friend and I agree – we need to know what the outcome of AR7 is. It is of great, indeed vital, importance.

Leaving that to one side, though there is another factor which I argue undermines my friend’s case, and bolsters mine. That is that the cost of allocation rounds is not then end of the cost of renewables piled on the consumer. Three paragraphs from Mr Turver’s article spell this out:

However, subsidies do not represent the full cost of renewables. First, because wind and solar are intermittent their output can fluctuate significantly so that sometimes they produce less than expected and at other times can produce more than demand or more than the grid can handle. At these times we pay wind farms to curtail their output. The grid needs to be always balanced so we also pay gas generators to fire up to compensate. NESO produce Monthly Balancing Services Summary reports and the data for 2024/5 shows the cost of this service was £2.7bn. In addition, we pay for backup through the capacity market and the OBR shows this cost us £1.3bn in 2024/25. Grid balancing adds about £54 to the typical electricity bill and the Capacity Market adds about £27.

NESO forecasts balancing costs to rise to £6.4-£8.3bn by 2030 and OBR forecasts Capacity Market costs to rise to £4bn per year in 2027/28. We can therefore expect these extra costs of renewables to rise to £10-12bn by 2030, again roughly twice the current cost of gas used for electricity.

In addition, because renewables are geographically dispersed, they need extra transmission on transmission lines to connect them to the grid. Ofgem has recently approved an initial £8.9bn of spending on the high-voltage electricity network. They claim this is the first step of an £80bn programme to boost the electricity network capacity. They estimate this will add a further £74 to electricity bills.

I have touched on some of this above, and I don’t want to be seen to be double-counting. However, these are costs that can’t be ignored. Yet they are ignored by the government’s levelised cost numbers. Mr Miliband likes to quote these because they purport to show that renewables are cheaper than fossil fuels. But when you take into account the extra costs on the system that are purely attributable to renewables, it can readily be seen that this is not the case. I don’t propose to go through it all in detail again now, as I have already opined on this subject at length here.

Before leaving this topic, however, I feel the need to discuss the extraordinarily high prices on offer in AR7 for floating offshore wind. My friend isn’t concerned by this, saying “I am ignoring the floating offshore at £271 as it is currently not a key component in the mix and is clearly very expensive but only for small volumes. I regard it as seed capital for more r&d which doesn’t mean it can’t be criticised as a waste of money if it doesn’t deliver technology improvements/jobs but I don’t see it as core to the question of renewables v gas”.

In March 2023 the last government issued a policy paper in which it said “The UK has a world-leading ambition to deploy up to 50GW [of offshore wind] by 2030, with up to 5GW coming from floating offshore wind.”

I have seen nothing from Mr Miliband to suggest that the current Labour government is drawing back from that ambition. Again, we need to see what happens, and “up to 5GW” is not necessarily the same as 5GW. However, should the government sign up to more than modest volumes of floating offshore wind at the prices proposed in the AR7 offer, then this could yet prove to be very expensive.

The other article that caught my eye was in the Guardian. Despite the Guardian being a cheer-leader for the climate crisis narrative, and a massive enthusiast for all things net zero, its headline made sobering reading for net zero supporters: “Energy bills likely to rise by 20% in next four years, says Britain’s biggest supplier – MPs told that even if wholesale prices plummet, consumers face higher bills owing to costs of government policies”.

Rachel Fletcher, director for regulation and economics at Octopus Energy, issued a stark warning:

Fletcher, who has held senior positions at Britain’s energy and water industry regulators, said “serious and urgent consideration” was needed to address the rise in non-commodity costs, which include levies paid through bills to support upgrades to gas and electricity networks, running the energy system and subsidising low-carbon power projects. This could include delaying investments that were not needed by the UK energy system in the short term, she added.

In addition:

Chris Norbury, the chief executive of E.On UK, said the supplier’s own modelling had suggested that even if the wholesale price was zero bills would still be where they were today because of the increase in non-commodity costs….

…Other costs that have risen over recent years include the price of upgrading Britain’s energy networks, which has increased by more than £140 annually in the last four years to £396 a year under the cap. Policy costs, which include supporting low-carbon electricity projects, have climbed by £86 a year to £215 under the current price cap.

“It’s time we got this burden under control,” Fletcher said. “There’s no budgetary control of this and yet it all ends up on household bills or contributing to making our electricity some of the most expensive in the industrialised world.

The final paragraph was particularly interesting:

“We need a government that is looking at a range of radical options alongside the regulator and other parts of the energy system to much more quickly address the path that we’re on before it’s too late,” Fletcher said.

As so often, there may be special pleading here. Much of it is based on modelling, and I am always quick to criticise over-reliance on models – GIGO and all that. However, when industry executives – who are at the sharp end, and who understand how the system works, and where the costs are coming from – make these claims, I suggest we should pay attention.

Conclusions

I am grateful to my friend for an interesting discussion, which has caused me to look in greater detail at the issues he raised. I am happy to accept that he makes some valid points. Probably the point that resonates most with me is that we need (between gritted teeth if necessary) to accept that costs that are already built-in to the system just have to be borne. The key issue is what is the cheapest, and most energy-secure way forward from where we are now.

Nothing that I have read in order to respond to my friend has made me change my mind, other than at the fringes with regard to some small details. Solar is indeed cheap (but not as cheap as the headline CfD figures suggest, when the additional costs of coping with the intermittency of renewables, and the infrastructure costs of transferring it from locations remote from demand centres, are taken into account). Furthermore, it is usually unavailable (or available sparsely) at times of greatest domestic demand. The headline CfD price of onshore wind may not seem to be excessive, but again, the headline costs ignore the additional costs of dealing with its intermittency and of extending the grid. Offshore wind is expensive – fixed offshore less so than floating, but increasing either or both will make bills go up, not down. The problem here is that while the government plans to double onshore wind, it plans to quadruple offshore wind. Things can only get worse.

The argument that locking in at a modest premium for 20 years under CfDs is a great guarantee avoiding price shocks, misses the point that it’s actually locking in a high price, because CfD costs ignore all the additional costs such as BESS, grid extensions, running gas as a second system, and doing so much more expensively than would be the case if we relied on gas alone (or for the bulk of our electricity), constraints payments, artificially raising the cost of gas by imposing a carbon cost on it (a cost which is set to rise year on year) and so on.

Favourably comparing potential AR7 prices to existing average electricity prices also misses the point that existing prices are already high due to all the renewable subsidies and hidden costs that the LcoE doesn’t include. 20 year guaranteed prices won’t avoid huge price fluctuations, because the CfDs cover only some of the costs of renewable energy. It ignores the extraordinarily high prices we at times pay for electricity – during a dunkelflaute, for instance.

Finally, who would ever have thought this would appear in the Guardian? “Ed Miliband needs a plan for industry – without it, the move to net zero could ruin UK manufacturing”.

It would be harsh to blame the energy secretary for a crisis he inherited and a decline in manufacturing that has been going on for four decades. But the way the transition to renewables was managed under the Tories, and now under Miliband can only be described as a disaster that will see much of UK industry depart for an easier life elsewhere.

It’s almost as though the article was written – and I recommend reading it – to make my case for me. Being the Guardian, of course, it doesn’t conclude that net zero should be abandoned. Still, if even the Guardian has spotted that net zero is making electricity bills unaffordable, and that high electricity prices are crippling what is left of UK industry, surely it’s time to think again?

Alternative Conclusion

If you want the short version, read instead the latest iteration of Robin Guenier’s Case Against Net Zero.