Britain finally has a plan to lower energy bills

The Onward plan to ‘Make Electricity Cheap‘ is an important step in the right direction

Harry Wilkinson is Head of Policy at The Global Warming Policy Foundation

After a decade of despairing at the direction of British energy policy, I am tentatively optimistic that we finally have a plan to get bills down. Respected energy analyst Ed Hezlet has just announced the bones of a Conservative proposal to ‘Make Electricity Cheap’. It’s an important step in the direction of making energy policy serve the public over vested interests. In doing so, it can get the economy back on the right track.

At the heart of the plan, launched by Onward and endorsed by Claire Coutinho on Wednesday, are two key acknowledgements. The first is that cheap energy is vital for prosperity. By neglecting costs concerns in our pursuit of Net Zero, we have ended up with the highest electricity prices in the world, deindustrialisation and energy poverty.

The second is that cheap electricity can help us reduce emissions in the wider economy, beyond the power sector. Its carbon dioxide emissions now make up only 10 per cent of our carbon footprint, or less than 0.08% of global emissions. But by pushing ahead with its complete decarbonisation, we are facing exponentially higher costs, preventing people from buying EVs and heat pumps that they would have purchased freely if electricity was cheaper.

So how will it work? The idea is to stick with existing renewable energy contracts, but to stop commissioning new wind and solar projects — instead focussing on ‘firm power’. Commissioning new nuclear and a bit of new gas will become the priority, preventing the need to build out masses of new infrastructure. These reduced grid costs are where most of the expected savings come from, representing £137 billion out of an expected £320 billion versus a business-as-usual scenario by 2050.

There are other significant savings to be found in the package. Axing a carbon tax known as the Emissions Trading Scheme (ETS) helps lower wholesale costs by £94 billion; reducing the need to balance intermittent wind and solar saves £67 billion. Just £22 billion in savings come from a lower subsidy bill. These are partly offset by higher spending in the Capacity Market, to support more ‘firm’ generation technologies.

The plan works because it faces the reality of our electricity system. As Hezlet explained, there’s no “jar of marmalade” to store renewable energy when it’s sunny or windy for later. In fact, Britain has only one hour of storage capacity. The current trajectory means building out huge amounts of excess generation capacity and grid infrastructure to be used progressively more inefficiently.

Photo by Veronica White on Unsplash

Crucially, it also faces the political reality. Tim Stanley recently provoked many on the right by writing an article in which he argued the right needs to get serious about climate change. While some thoughtful responses challenged his interpretation of climate science and were careful to distinguish between scepticism of the statutory target of Net Zero versus climate change itself, they failed to answer the core emotional question of ‘Does the right care about climate change?’

While some Net Zero sceptics would like to see a bolder rejection of the status quo, they must also grapple with the truth that the public do care about climate change, and they want to see a government that has a pragmatic plan to tackle it.

The ‘Firm Foundations’ plan by Onward is just that. And it’s a vastly better one than we have now. It recognises where the real opportunities for market-driven decarbonisation are, and that to leave the public better off, we need to embrace consumer choices rather than foist technologies upon the public. This is a credible, deliverable alternative to Net Zero that helps us meet both economic and environmental objectives.

Coutinho has put her opponents on the back foot. Net Zero’s loudest advocates still refuse to accept what’s driving Britain’s high electricity prices, while some of its harshest critics dwell on the previous government’s record, rather than offering detailed proposals that can lower energy costs.

That said, as Hezlet acknowledges, we need to be more ambitious still. Reducing system costs by 20 per cent by 2040, as envisaged in this plan, will not take British electricity prices back to internationally competitive levels last seen in the early 2000s. There is scope to introduce greater competition into the way the grid is managed, meaning that as much as possible we no longer have to rely on ministers making the right decisions but can use market forces to get prices down. But this is a valuable blueprint to start driving down costs in the energy system.

The dogmatic tendencies of left and right have denied the public a meaningful debate which grapples with the trade-offs inherent in energy and climate policy. A credible plan for our energy system must address the economic, physical and political realities of the situation we find ourselves in. This is the first serious strategy that honestly balances these competing considerations.