The real reason for the energy price hikes

Keir Starmer’s diehard commitment to net zero is damaging Britain and its economy through high energy prices, a dependency on imported power and a demand to cut energy use.

Since 2004 energy prices for British businesses have increased enormously, from 4 to 25 pence per kWh, crushing production and productivity. More expensive electricity makes it less profitable to invest in labour-saving innovations. Industrial revival isn’t possible without lower energy prices.

The new National Energy System Operator aims for “up to a 54 per cent reduction in peak demand in 2050”, using a system of tariffs. So, to reach net zero, we must cut our use of energy.

The problem of high energy prices goes back a long way. From 1960 to 1990 our electricity supply rose by 3 per cent a year, under the Central Electricity Generating Board. It used government bonds to fund energy projects cheaply, and prices were kept down.

Privatisation

But in 1989 Margaret Thatcher passed the Energy Act, which broke up the CEGB and privatised the industry. As a result, energy supplies fell as prices soared. Projects have come to rely on more costly private markets for funding – and nuclear power has stagnated.

Because wind and solar are not reliably able to meet our current needs, we must reduce our energy use to meet their inadequacy – an arbitrary and perverse approach to economic policy. Britain’s economy must be sacrificed, to cut our one per cent of world’s emissions.

Absurd amounts go to energy providers that don’t provide. Last year the government paid £25.8 billion in subsidies – £850 from every household – to green energy companies. This included £1.5 billion to compensate wind farm owners when they had to turn off their turbines because they were generating too much power to feed into the grid.

Despite the overall increase in electricity generated from wind, the supply is not consistent from hour to hour, day to day. The grid operator must constantly balance supply and demand. Gas-powered stations (and connectors from other countries) must be available to fill in when wind fails – and then the market price shoots up.

No surprise

No wonder Britain has the highest industrial electricity prices in the developed world, and the fourth highest domestic prices. That’s no surprise. In general, countries with high levels of wind and solar power have the highest electricity prices. Countries with little or no wind and solar power have low electricity prices. Yet Miliband wants to spend billions on quadrupling offshore wind and doubling onshore wind in just five years.

‘No wonder Britain has the highest industrial electricity prices in the developed world, and the fourth highest domestic prices…’

The government is offering particularly high minimum prices to ensure that its latest round of renewables licensing does not flop like the last one. In the recent round of wind power auctions it has offered investors a guaranteed price – for the next 20 years – even higher than last year’s subsidies, which were higher than the cost of gas-generated electricity.

The Met Office says mean wind speeds in Britain have been trending downwards since 1969. This has huge implications, given that turbine output varies according to the cube of wind speed.

Greencoat UK Wind – which calls itself Britain’s leading renewables infrastructure fund and owns 49 wind farms – warned in July that, because of low wind speeds, its turbines produced 14 per cent less power in the previous six months than it had forecast.

And it’s not enough to produce renewable energy. It has to reach industry and households. That means many more high-voltage transmission lines will be needed across the country, along with a grid that can cope with intermittent supply from the turbines and their low energy density.

This would be hugely costly and would occupy vast tracts of farmland. The National Energy System Operator estimates that £31 billion worth of upgrades would be required across the electricity network over the next five years.

It will be many years before there is enough installed renewable, nuclear and storage capacity to enable the old infrastructure to be switched off safely. Renewables are inherently variable, and battery technology isn’t yet adequate to store vast amounts of electrical energy needed to provide a consistent supply.

Compared with renewables, gas and nuclear power have greater “power density” – that is, they are available more of the time. There are other advantages too: they are relatively cheap in the long term; they need far less land than wind and solar installations; and they use steel and concrete more efficiently than wind farms.

Energy secretary Ed Miliband’s promise that household fuel bills will be £300 lower by 2030 is just wishful thinking. The government’s own Climate Change Committee admits that there will be no “net zero dividend” before 2038, or even 2042.

Opportunities destroyed

The government is so determined to impose “a fair and orderly transition” away from oil and gas to wind and solar power that it is destroying the opportunities to exploit our existing oil and gas reserves.

It has banned new oil and gas drilling in the North Sea, though it now hints at change. New drilling and exploitation could be worth £165 billion and provide 200,000 jobs, according to industry group Offshore Energies UK. 

Instead, according to official statistics, British oil output has fallen 42 per cent below pre-pandemic levels, and gas output is down 21 per cent. 

The result: Britain is importing from Norway oil and gas taken from the very same seabed that it could be exploiting but won’t. So Norway gets the jobs, the profits and the taxes. We get the price rises.

Britain imported 47 per cent of its total energy needs in the first quarter of this year, nearly a tenth more than in 2019. Greens take note: transporting the oil and gas costs money and adds to emissions.

Yet a new analysis by Westwood Global Energy Group says there are still 7.5 billion barrels of oil and gas in the North Sea, 3 billion more than the government says. Another energy analyst company, Wood Mackenzie, says there could be 14 billion barrels of recoverable oil and gas in the UK’s existing North Sea fields.

And the government’s North Sea Transition Authority estimates that there could be a further 15 billion barrels in unexplored areas outside the existing fields – that is, on top of those estimates.

Labour’s manifesto pledged to raise the effective rate of tax on what remains of UK North Sea production to an almost prohibitive 78 per cent and to end “unjustifiably generous” investment allowances. 

In November 2024 the government carried out this pledge and intends to keep the tax rate at that level until 2030. The result is utterly predictable (and in the eyes of government and Greens, desirable): a fall in investment and production.

To net zero enthusiasts, oil and gas workers are part of the enemy, special interest groups that need to be defeated.

Green groups, and the governments that embrace their backward ideas, want to stop us creating the energy that keeps our lights on and powers industry. They dogmatically oppose nuclear power and what they call “unnecessary economic growth”. And to achieve that reactionary aim, they want the people of Britain to pay unnecessarily high prices for energy.