Had you noticed that net zero’s not really about climate any more?
Cheaper electricity is at the heart of Labour’s energy strategy. If only Britain had thought of it sooner
Quiz question: how much time do you suppose the House of Commons devoted to debating net zero before it made it the law of the land? The question is of more than academic interest: eliminating carbon emissions is the single biggest industrial challenge humanity has set itself. That we were the first large country to write that ambition into law was a very big deal.
Yet we never really had a national conversation about why we’re actually doing this and what the consequences will be. In 2019, when that law went onto the statute book, the conventional wisdom was that it was all about climate change — about showing global leadership, even if it required domestic sacrifices.
Yet the most striking thing about Keir Starmer’s speech at Thursday’s launch of Great British Energy was how many times he mentioned the climate — which is to say, not once. Instead, he said net zero was really about energy security and not having to rely on the Middle East or Russia for oil and gas. It was about trying to rebuild our industries along the way.
The funny thing is, this is not all that different from the attitude in Beijing. China is charging headlong into making batteries, solar panels and wind turbines not because it wants to prove its green credentials but because it spies an opportunity. It wants to dominate the industries of the future, making billions on the way. And it wants energy security and a fleet of electric cars powered by Chinese coal and renewables instead of petrol cars running on Middle Eastern oil.
Until now, Britain had pursued a very different version of net zero. The objective was, above all, to reduce our carbon footprint — even if we had to offshore industry and buy all the kit from overseas. In one respect it’s going very well (UK carbon emissions are down by more than half since 1990), but there are a couple of problems.
First, this all came at a cost to domestic industry, which, in stark contrast to China’s, has neither thrived nor built many of our wind turbines. Second, those early carbon reductions were the easy bit, achieved mostly by shutting down coal-fired power stations. The next bit is far harder and will depend on consumers buying electric cars and replacing their boilers with heat pumps.
GB Energy is Labour’s supposed answer to all this. In future, it says, more wind turbines will be UK-owned and UK-built. And, Ed Miliband claims, that will bring prices down.
That last point is the part that really matters — and not just because it’s enticing for consumers. Without cheap energy, it’s hard to see how any of this works.
After all, one of the guiding principles of the energy transition is that we need to replace fossil energy with electric power. If electricity prices are low, running an EV is considerably cheaper than running a petrol car; same thing for a heat pump compared with a gas boiler.
Something similar goes for heavy industry. Across the country, companies are eyeing up green alternatives to their fossil fuel plants. But why would a glassmaker or paper mill replace its gas furnace with an electric one if, on top of all the capital costs, it were even more expensive to run?
And right now our electricity bills are so eye-wateringly high that none of this is a slam dunk. Granted, some of that can be blamed on Vladimir Putin and high gas prices, but even after you adjust for that, British power is more expensive than that of nearly any other country in the world.
Consider the tariffs paid by heavy industry. In the early 2000s British manufacturers enjoyed some of the cheapest power in Europe. Today they face prices 75 per cent higher than the Continental average.
Why? Paradoxical as this will sound, it is both because we were so quick to go green and because our power is still not green enough.
Taking them in turn, the shift from fossil fuel energy to low-carbon energy has unequivocally pushed bills up. How could it not? For most of the past two decades wind turbines were far more expensive than fossil fuels. So a complex cocktail of charges — renewables obligations, feed-in tariffs, contracts for difference, emissions trading schemes — were bolted on top of wholesale energy prices to tax polluters and subsidise green schemes. In Germany all those costs were passed on to domestic customers; here in the UK they are shared with heavy industry, which, by the way, is part of the reason Britain is deindustrialising faster than every other developed economy.
Happily, these days wind turbines are considerably cheaper and considerably less reliant on subsidies. And while there is still the gnarly question of where we’ll get our power from when the wind isn’t blowing (there’s a whole other column in that), in theory today’s enormous turbines should occasionally be able to provide us with power at rock-bottom prices if the wind is blowing particularly hard. In theory.
But that’s before you reckon with the byzantine workings of Britain’s wholesale power markets, designed for an age dominated by coal and gas. I’m simplifying enormously here, but the principle is that as long as there’s even a little bit of electricity coming from a gas power station (which there always is), the prevailing price across wholesale markets is the going rate for natural gas, which just so happens to be: quite a lot right now.
You see the problem. Britain has the worst of both worlds: high prices determined mostly by wholesale gas prices, and then green subsidies on top.
In an ideal world a customer would be able to pay the going rate for wind or solar — which could be zero every so often. In an ideal world we’d go even further and have regional prices, so areas with more wind turbines would get cheaper energy. Scotland would enjoy the lowest prices in Europe, establishing itself as the industrial hub of the future.
But that would mean upending how those wholesale energy markets work, upsetting a fair few vested interests along the way. And here’s the catch: Labour hasn’t actually committed itself to that. Instead, GB Energy will be just another energy provider and investor, whose costs might be even higher than the competition’s, given it’s trying to buy more components domestically. Far from bringing bills down, it could actually push them up.
Still, at least we are now debating this stuff. And, in its defence, in its first few weeks Labour has sketched out a vision and a set of energy institutions that is far more coherent than anything the Conservative Party threw at the sector in 14 years. If only we’d had these conversations in 2019, when net zero actually became law.
Which brings us back to that question at the top: for how long did the Commons actually debate this complex, far-reaching piece of legislation? Answer: all of 88 minutes.
Indeed, the original plan was simply to sign it into law as a statutory instrument without any debate at all. But in the dying days of Theresa May’s premiership there was an unexpected gap in the order of business. Enough time for the briefest discussion about climate change, hardly touching on any of the stuff you’ve just read about.
Then the law was waved through onto the statute book on the nod. MPs didn’t even divide for a vote.
Ed Conway is economics editor of Sky News and the author of Material World
