From the London Review of Books, September 24:
For the second time in five years, Britain is experiencing an energy crisis. The political debate has coalesced around two proposed solutions. The first, advocated by the ‘Drill, baby, drill’ contingent, favours fast-tracking new oil and gas licences and reducing taxes on fossil fuel companies. Its proponents point to the Norwegian energy system as a model, but don’t suggest setting up a majority state-owned company like Equinor or bringing in export controls on oil and gas. That the UK’s remaining fossil fuel reserves in the North Sea are inadequate to demand is often ignored.
Supporters of the second solution believe that Britain should focus on scaling up renewable forms of electricity generation, such as wind and solar power. This overlooks the fact that electricity and total energy use are not the same thing. Even if Britain were to produce all its electricity from renewables, the country won’t be able to escape the influence of fossil fuels as long as 85 per cent of UK homes continue to rely on gas central heating. This camp, with a quixotic commitment to globalised energy capitalism, also claims that any new domestic production won’t affect our energy prices because oil and gas are traded on a global market. But many countries do control exports and prices. Renewables boosters want to see increased subsidies to private sector electricity generators (especially wind and solar farms), but have no enthusiasm for public ownership. Britain’s political class remains unified in its belief that energy infrastructure must be owned by the private sector. Since privatisation in the 1980s, successive leaders have rejected any suggestion of nationalisation, despite the scale of the crisis facing the British energy industry. The Burnham government may mark a turning point. It has promised to set out plans for ‘stronger public control’ of essential services, though the relationship between control and ownership has yet to be defined.
In January 2009, a border dispute between Ukraine and Russia led to a rapid rise in European gas prices. Ed Miliband, then energy secretary under Gordon Brown, went on the Today programme to reassure listeners that Britain had a ‘diverse range of sources where our gas comes from, which is the most important thing this dispute teaches us’. By this he meant gas entered Britain from the North Sea fields and on tankers carrying liquefied natural gas, mostly from Qatar and Algeria. A few months later, Miliband approved a National Strategy for Climate and Energy, which pitched renewables as a way to ‘improve the security of Britain’s energy supplies’ and claimed that the ‘diversity of our gas supplies helped the UK to remain largely unaffected by the Russia-Ukraine dispute’.
Others were concerned about the potential impact on prices of future shocks. In 2010, the energy industry regulator, Ofgem, concluded a major study into the resilience of the system. One of the scenarios it tested was a Russia-Ukraine conflict. The resulting report, Project Discovery, warned that ‘consumer bills rise in all scenarios due to the levels of new investment required
... and especially so if oil and gas... prices spike sharply.’ Project Discovery was swept under the carpet then and is almost never mentioned today. To remember it is to admit that the British state lacked the capacity to do anything about the crisis it correctly predicted would happen.The energy crisis of 2021-23 was much more serious than that of 2009, although in its early stages politicians were keen to tell the public that there was nothing to be worried about. In September 2021, the business secretary, Kwasi Kwarteng, dismissed concerns as ‘alarmist, unhelpful and completely misguided’, assuring Parliament that Britain had ‘a diverse range of gas supply sources’. As the scale of price hikes became clear, the government desperately tried to pull every lever, even contemplating buying gas itself. This proved too complex an undertaking; the civil service had no experience of buying gas in bulk. As Britain’s privately-owned gas system operator put it: ‘The underlying market arrangements in the UK are predicated on the basis that the market will provide.’ Trying to get financial support to the households that needed it most was particularly difficult, because the IT systems holding data on welfare beneficiaries weren’t linked to those of the energy companies.
In the end, the government threw money at the problem. Energy suppliers were told to pay whatever was necessary, all consumer bills were capped and the state picked up the bill – at least £40 billion. In the aftermath there were recriminations and calls for reform. But most of these initiatives failed, scuppered by the complexity of the task and lobbying by energy companies. The IT systems still aren’t linked up. The way electricity and gas markets operate remains the same.
Britain has some of the highest electricity prices in the world. It is convenient for the industry to blame this on Russia’s invasion of Ukraine, but electricity prices have been rising above the rate of inflation since 2003. Between 2000 and 2019, prices for residential customers increased by 80 per cent. Only a handful of countries had greater price increases than the UK in this period. The energy industry and political commentators debate the reasons for this ad nauseam. Some blame it on renewables, claiming that even if wind farms are cheaper to run than gas-fired power stations, they require lots of electricity network in remote places and lots of battery storage. Others blame fossil fuels, claiming that the real issue is Britain’s reliance on gas. According to the rules of the wholesale market, the price of electricity is set by the most expensive source needed to meet demand. In Britain that source is gas around 60 per cent of the time, down from around 90 per cent five years ago. Many other countries have the same approach to electricity pricing. What differs is the kind of power that sets the price. In France it is usually nuclear, and in Norway, hydro. Britain scrapped its coal-fired power stations and has little flexible hydro or nuclear, so the last power station called on is almost always gas.
There are elements of truth to both positions. A third of the increase in the average electricity bill between 2016 and 2026 was due to the increase in gas prices. But another third was due to increased subsidies for generators (resulting in part from higher interest rates and the growing cost of equipment and labour). A further 20 per cent was due to rising electricity network charges following a wave of construction after decades of underinvestment. Whatever the reasons for rising bills, the bigger problem for renewables is trust. For at least a decade, the British public has been told that renewables are cheap and will bring down bills. Between 2000 and 2025, the share of electricity generated by renewable and clean sources (wind, solar, hydroelectric, nuclear) rose from 24 per cent to 50 per cent. But this has failed to translate into stable or reduced electricity prices.
The shift to renewable electricity generation won’t reduce electricity prices in the short term. When Labour was elected in 2024, one of its top priorities was to reach ‘clean power by 2030’. This means the electricity industry has to build a huge amount of infrastructure very quickly. Privatisation in the 1980s established the principle that all costs must be recovered from the consumer. Until very recently, even the subsidies given to generators of renewable energy came entirely from consumers rather than from the Treasury (the 2025 budget moved roughly a fifth of total renewable subsidies onto general taxation for the next three years, but the rest still falls on bills). In other countries, including France, Norway and China, the state picks up more of the tab – energy infrastructure is publicly owned and subsidies are paid from general taxation.
Britain’s energy strategy over the last two decades has been predicated on the assumption that generating electricity from renewables is cheaper than generating it from fossil fuels. ‘Decarbonisation’ was supposed to drive down prices and encourage consumers to switch from using fossil fuels for driving and heating. This hasn’t happened. One important metric is the share of final energy demand serviced by electricity: it has barely increased over the last two decades, going from 19 per cent in 2000 to 21 per cent in 2023. Between 2000 and 2019 electricity consumption per capita actually fell by 22 per cent. Only Yemen, Zimbabwe, Jamaica, Tajikistan and Syria have had greater drops.
Rising electricity prices have undermined electrification. Electricity is harder to deliver than gas and thus more expensive, but how much more expensive – what is known as the ‘spark gap’ – is an important factor when households or companies decide whether or not to electrify. The UK has one of the widest spark gaps in Europe. In the three years after the last energy crisis, the gap grew so the incentive for consumers to switch to heat pumps weakened....
....MUCH MORE, it gets worse.
I'll leave with this bit of reality:
—William Ophuls
Possibly related:
"Maken Engelond Gret Ayeyn"