Anyone listening to Boris Johnson’s evidence before a cross-party group of MPs last week would have been forgiven for thinking the cavalry was coming in the battle against soaring energy bills. The prime minister talked about the “massive potential” of offshore wind farms and said he wanted “big-ticket nuclear solutions” to be part of Britain’s push for self-sufficiency.
Spiking wholesale gas prices, exacerbated by Russia’s invasion of Ukraine, have brought the energy mix into sharp focus by piling pressure on to families and businesses.
On Friday, 22 million customers on tariffs linked to the energy price cap saw their bills rise by £693 a year to £1,971 on average. Suppliers’ websites crashed as people rushed to submit meter readings under a cheaper rate before midnight on Thursday. The government’s independent economic forecaster has warned that bills could hit £2,800 in October.
But a row between Johnson and Rishi Sunak over the cost of building up to eight new nuclear power stations, plus delays to the energy security white paper due this week, highlight an awkward truth: none of Westminster’s solutions will be quick or easy.
Although solar and offshore wind farms are less complicated than developing nuclear capacity, it can take several years to get planning permission and connect them to the national grid. “The planning process for wind takes years and the turbines are erected in a day,” said Greg Jackson, founder of Octopus Energy.
After more than a decade of dithering over nuclear power by successive governments, which has alienated potential investors, it could be a decade or more until the lights go on at Johnson’s first new plants.
In the meantime, a revised funding model announced in October by Kwasi Kwarteng, the business secretary, will actually increase energy bills by passing some of the upfront costs of nuclear projects on to consumers.
Tim Stone, chairman of the Nuclear Industry Association, acknowledged that the nuclear push was far too late to make any difference to the current crisis.
“This gives some confidence, if they get it right, that our children and grandchildren will be protected, but there’s no way it touches anything in the short term,” he said.
The European Union imports about 40 per cent of its gas from Russia; the UK only 4 per cent. Germany and Austria took the dramatic step of drawing up rationing plans last week, preparing to shut down parts of industry to keep gas flowing to homes.
Johnson’s cabinet has appeared unwilling to advise consumers to cut back — perhaps mindful of the backlash that greeted the supplier Ovo in January after it recommended customers cuddle pets to stay warm.
Efforts to improve the insulation of draughty houses have been shambolic. The green homes grant of up to £10,000 was supposed to improve the energy efficiency of 600,000 properties but ended up covering just 47,500. A new scheme was launched on Friday offering homeowners grants of up to £6,000 to install heat pumps costing about £10,000, although fewer than one in five homes may be eligible because they must first be shown to have sufficient loft and cavity wall insulation.
Sunak has been severely criticised for failing to do enough to protect families from the cost of living crisis. This month’s rise in energy bills comes as council tax and national insurance payments are going up too. The chancellor has given four-fifths of households a £150 discount on their April council tax bill and promised a £200 loan to all electricity customers in October.
Richard Howard, of the consultancy Aurora Energy Research, said: “It’s crazy that there’s not more support for households on things like loft insulation ... we would be permanently using less energy, particularly gas.
“You could also target that really well towards poorer households. But it’s not a big, shiny infrastructure project that you can cut the ribbon on — it’s thousands, if not millions, of small interventions — so it’s less attractive politically, maybe.”
Long-term shifts in the energy mix and the closure of the biggest storage facility have left the UK highly exposed to wholesale gas prices, which are even more volatile than before due to the war in Ukraine. Having traded at about 50p a therm a year ago, the price of gas shot up to more than 500p a therm early last month.
Britain has cut its carbon emissions faster than any other rich country over the past two decades. In 1992, coal generated more than 60 per cent of our electricity, with solar and wind power almost nonexistent. Coal has since fallen to less than 2 per cent of the mix, with renewables up to nearly 40 per cent. Gas is now the single biggest source at 40 per cent.
We have been net importers of gas since the decline of North Sea production in the early 2000s, with most coming from Norway. Meanwhile, a collapse in nuclear power from almost a quarter of the energy mix to just over 15 per cent has left us increasingly turning to gas — and sometimes even to coal — when the sun doesn’t shine and the wind doesn’t blow.
Johnson wants nuclear power to account for 25 per cent of electricity generation by 2050. That will require a huge turnaround. All but one of the eight plants currently in operation are due to be switched off by 2030. Costs and uncertainty over government support have deterred international investors such as Japan’s Hitachi, which walked away from a site in north Wales two years ago after sinking £2.1 billion into the project.
The only nuclear plant being built is the heavily delayed and over-budget Hinkley Point C, in Somerset, a joint venture between France’s EDF and Beijing’s China General Nuclear Power Group (CGN). The government wants to push ahead with a second EDF scheme, Sizewell C, on the Suffolk coast, and has set aside £1.7 billion of taxpayers’ money to help. But cooling relations with China means ministers want to eject CGN from its 20 per cent stake and bring in new investors.
This week’s white paper is expected to set out targets to more than triple solar power capacity and quadruple offshore wind. The 2030 plans include doubling onshore wind, which is unpopular with many backbench Tory MPs due to its effect on the landscape. Fracking is understood to be off the table.
This renewables splurge will bear fruit more quickly than the government’s nuclear ambitions. But even so, we face at least five years of elevated gas prices — and no sign of the cavalry.
For many families, the only hope will be to turn down the thermostat and put on another jumper.
