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The reason UK industrial electricity prices are the highest in the world is a simple combination of physics and neoliberal policy. The physics is easy enough – you can’t generate solar energy at night, and you can’t generate wind power when the wind isn’t blowing… nor, by the way, does the addition of several billion pounds’ worth of wind and solar capacity change this. The policy lunacy comes in the form of the suicidal neoliberal assumption that we have to engineer a “market” in electricity. In practice, of course, electricity is a natural monopoly – the supply companies (in reality, just billing companies) may be different, but the grid infrastructure and generating plants are the same… and nobody is ever going to build an entirely new grid to compete with the existing one.
The way in which the quasi-market operates is entirely a matter of choice. However, the dead hand of prior investment leaves the political class reluctant to make changes. And so, we have a system divided between the generators, the grid operator, the retail supply companies, and a regulator whose role (although you may be forgiven for not knowing it) is to keep prices low for consumers… even at the expense of energy security. More recently, a whole raft of net zero regulation has been thrown into the mix – most notably the 12% and rising levy on electricity bills to pay for the fast-failing switch away from gas central heating and the installation of heat pumps.
The Byzantine issue within this dog’s breakfast is how to allocate the money which domestic and industrial consumers pay for their electricity to each of the players in the mix. And it is here that we discover the primary reason why UK electricity is so expensive – margin cost. Absent the arrival of the green energy fairy to make the sun shine at night, intermittent generation has to be backed up by a large capacity of “firm” (available in all conditions) alternatives. While pumped hydroelectric plays a small role in this in the UK, and despite hopes that some battery storage breakthrough may turn up sometime soon (it won’t) for the foreseeable future the only viable options are domestic gas generation and imports from our European neighbours. UK nuclear (much of which is due to close in the next two years) provides a steady baseload of some 15% of the UK’s consumption but cannot respond quickly enough to iron out the intermittency of wind and solar.
In a genuine market situation, price would be allocated on a full-cost basis. In which case, gas – even after we voluntarily disconnected ourselves from cheap Russian supplies – would win hands down. And in the longer term, the still vast UK coal reserves would make coal power competitive too. But – for clean air rather than net zero reasons – coal became unpopular, with coal generation being moved out of the cities in the 1960s, and being closed down entirely in the 1980s as North Sea gas began arriving in large quantities (the early 1970s also saw the nationwide conversion of gas appliances from “town” – i.e., coal – gas to natural gas to take advantage of the North Sea reserves). From the late-1990s, as North Sea production peaked, the push began for “green” (i.e., technologies built in poor and polluting conditions somewhere else) electricity technologies to replace hydrocarbon generation entirely.
To encourage this, the UK government adopted a wind-first policy. That is, anytime the wind is blowing, the grid must use this electricity first. Only if there is a gap between supply and demand can the grid bring gas generation online. This has the desired impact of making wind generation cheaper (for the generating corporation) than gas generation, which has to shut down operations when the wind is blowing, despite still having to pay wages, maintenance and wholesale gas prices. To add to the profitability of the wind corporations, all generators are paid at the highest margin cost (usually gas) within the system. That is, despite having no margin cost (wind is free) the wind generators get paid as if they were consuming gas (which is also artificially high because we voluntarily ceased using cheap pipeline gas from Russia in favour of expensive liquid natural gas from Qatar and the USA).
To make matters worse, the UK government has turned a blind eye to the closure of gas plants in the insane neoliberal belief that we will always be able to import the electricity we need from Europe. In the past year, the UK imported 14.5% of its electricity from Europe during periods when domestic generation was too low to meet demand. This, of course, might have been much higher if the winter had not been as mild as it turned out (although on 8 January 2025, we came within a whisker of widespread blackouts). The trouble is that imported electricity is subject to volatile price swings due to demand across Europe… a problem which may worsen if Norway and Sweden put tariffs on exported electricity to keep their domestic prices down.
Wind (and solar) generation then, only appears cheaper due to the huge indirect subsidies provided by a government which is zealously pursuing a neoliberal net zero agenda. One obvious alternative – ironically, the one offered by Reform UK in its 2024 election manifesto – is to simply nationalise the electricity monopoly – bring back some version of the old Central Electricity Generating Board, and bring all of the costs under one entity (and probably saving millions if not billions by cutting bureaucracy and duplication). This would not remove the intermittency issue, but it would at least force us to acknowledge the true cost of it. Moreover, it would promote more secure domestic generation over insecure imports from the continent).
Obviously, this is not going to happen while the most right wing of the major parties is in government. And by 2029 it may be too late to avoid the electricity death spiral as the cost of generation exceeds domestic and industrial consumers’ ability to pay. One thing, however, we can be certain of is the growing popular revolt against the neoliberal version of net zero.
Back in the 1990s, when the first versions of net zero were being proposed, there was broad support for the aims of the policy. Most of the UK population accepted the climate science and believed that something ought to be done to address it. But that was a classic example of what has come to be known as a “luxury belief” – which confers status on the believer while transferring the cost to someone else. So long as net zero was limited to less damaging refrigerants, more recycling, LED lightbulbs, and grants for home insulation, most of us could buy into it. But as wind farms approached a majority of generating capacity, and especially after the European and UK elites eschewed cheap Russian energy, prices have reached economically-destructive levels (the only reason Britain hasn’t reached German levels of de-industrialisation is because we de-industrialised in the 1980s).
The increasingly popular counter-argument from the national populists is that not only is net zero too expensive, but it is totally irrelevant. Since the UK generates around one percent of global carbon dioxide, even if the British Isles slipped beneath the waters of the North Atlantic, the drop in emissions would be so tiny that it would have no impact on global warming. Indeed, since China is installing coal power plants faster than the UK is curbing its emissions, even if Britain disappeared, global emissions would continue to rise. Even the claim of moral leadership fails as the wider economy is undermined by the rising cost of electricity. None of the countries with access to fossil fuels is following Britain’s lead, while most developing countries are embracing any and all forms of generation to raise their domestic standards of living. Only Britain and Germany, it seems, are bent upon domestic economic devastation in an effort to prove the impossibility of net zero.
Some form of carbon reduction though, will be forced upon us as global oil and gas production pass their respective peaks. Already, the vital medium distillates – diesel and jet fuel – are in decline, adding to transportation costs and, indirectly, to the cost of anything which has to be transported, any agricultural product that requires the use of heavy vehicles, and any mineral resource extracted with diesel-powered machinery. Nor – and this may explain in part the Trump administration’s attempt to reform global trade – is this simply a matter of global wholesale pricing because, as the costs rise, more of the remaining fuel will be reserved for the domestic economies of oil producing states. Gas reserves are greater and are not expected to peak for another decade or so, but without cheap oil-based fuels, the extraction costs – and thus the wholesale price – will increase anyway.
These are likely medium-term problems – particularly if Trump’s licencing of fracking beneath federal land produced another decade of American oil and gas production and/or if the theoretical reserves beneath Siberia are brought onstream. The more pressing concern – at least for the western elites – is the recognition of short-term electricity shortages. This, rather than the growing public revolt, looks set to summon the two horsemen of the net zero apocalypse.
Five years ago, I explained (because trends are obvious when you know what to look for) that:
“Once… the rich realise that even retreating to their bunkers in New Zealand will not save them from the calamity that is racing to meet us; an entirely different – and far less ‘green’ – set of proposals is likely to emerge. I don’t doubt that sooner or later the global rich will turn to geoengineering in a last-ditch effort to curb global warming while reaching for a plethora of experimental nuclear technologies in a desperate attempt to offset the coming decline in fossil fuel production…”
It should come as no surprise that the Big Tech giants, whose datacentres are energy-hogs, have been turning to nuclear power for ostensibly “green” reasons – something that will increase as energy prices continue to rise and as intermittent renewable energy fails to meet the demands of high energy users. This said, global uranium supply will struggle to meet projected demand, while alternatives such as China’s thorium molten salt reactor in the Gobi desert are still in an (albeit advanced) experimental stage – with European and American competitors yet to even power up their respective reactors (which may result in western tech corporations having to licence their “fourth generation” reactors from China).
Going nuclear and ending support for wind and solar however, requires an alternative approach to global warming. Here it is worth remembering that cutting carbon emissions was always but one approach to a problem which ultimately concerns the amount of solar radiation left within the atmosphere. Carbon dioxide plays a minimal direct role in trapping solar energy, since it is just 0.0427 percent of the atmosphere. Rather, it is its indirect role in increasing water vapour which makes it a problem. The trouble (mostly for the western elites) is that reducing the level of carbon dioxide to the 0.0311 percent last seen in 1950 (when only a handful of countries were industrialised, and when even these had living standards far lower than today) by cutting western emissions, will bankrupt most of the western economies (and corporations) while leaving China (and its Russian partner) as the dominant, and still fossil fuel-consuming economic hegemon.
Once, however, the problem is framed through the imbalance between sunlight entering and leaving the atmosphere, the second horseman – geoengineering – emerges as the only acceptable approach on the table. Set aside the techno-utopian fantasies about space mirrors and Dyson spheres, and the obvious “solution” that presents itself is to spray reflective particles into the upper atmosphere – in effect, blocking the amount of (ultraviolet) sunlight from entering in the first place, and thereby providing the space for previously blocked (infrared) light to escape back into space. Which, apparently, is what the UK’s Aria (Advanced Research and Invention Agency) project is seeking to achieve.
The Aria researchers dress the programme in the “green” language of “buying time” while carbon reduction approaches are brought online. The also set out decision trees to address the moral issues around a single team in a single location engaging in geoengineering experiments which may impact the entire planet, as well as tackling the potential moral hazard (that geoengineering becomes preferable to carbon reduction). However, it is unlikely that the wider world will go along with this. Certainly China, the world’s largest carbon emitter (albeit in large part to supply western consumers with manufactured goods) is more likely to opt for geoengineering than closing down its 1,161 coal power stations. Moreover, the wider BRICS and BRICS-associated countries – many of which are attempting to catch up with western levels of consumption – will also lean toward geoengineering rather than voluntarily take the economic hit that carbon reduction would involve. Even Trump’s USA is going to favour geoengineering over carbon reduction. And, of course, western Big Tech is in no hurry to close datacentres when an alternative to carbon reduction is on the table.
As I concluded five years ago:
“Whether it will work is anybody’s guess; but it is worth remembering that all of the problems we face today are the result of solutions that we put in place in the past.”
To get ahead of the game, the smart money will need to address the problems that arise from the widespread use of nuclear power and a geoengineered atmosphere… it is only a matter of time.
As you made it to the end…
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