Hat tip to Claire Coutinho (then Energy Secretary, now Shadow Secretary of State for Energy) and the think tank Onward with modeling by Transira Energy
STU TURLEY
Britain’s electricity prices rank among the highest in the developed world—frequently the highest for industrial users among IEA countries and near the top for households. This is not primarily bad luck with global gas markets or geography alone. It stems from deliberate policy choices that prioritized rapid power-sector decarbonization through massive deployment of intermittent wind and solar, while understating the full system costs those technologies impose.
A detailed full-system analysis, originally commissioned by Claire Coutinho (then Energy Secretary, now Shadow Secretary of State for Energy) and completed by the think tank Onward with modeling by Transira Energy after the subsequent government canceled the work, quantifies the problem.
Titled in connection with Firm Foundations: The case for cheap and reliable power (and the underlying Powering Britain comparison of pathways), it compares a “Business as Usual” pathway dominated by wind and solar aiming for near-total power-sector Net Zero against an Alternative Policy Pathway that prioritizes firm, dispatchable power (more nuclear, retained gas capacity, fewer intermittent plants, and removal of certain carbon pricing distortions on electricity).
The results are stark: prioritizing firm power could save consumers over £320 billion in cumulative system costs between roughly 2030 and 2050—equivalent to around £540 per household per year—while still delivering a grid that is nearly 80% clean. Roughly half the savings come from needing far less network infrastructure (pylons, cables, and grid reinforcements). Other major savings arise from lower wholesale prices, reduced balancing and ancillary services costs, and lower subsidies. Electricity costs under the cheaper pathway would be about a fifth lower by 2035 and nearly a third lower by 2050 relative to the high-intermittency path.
Wind and solar have near-zero marginal fuel costs and can appear cheap on a simple levelized cost of energy (LCOE) basis. But high penetrations create large “system costs” that are socialized onto consumer bills rather than fully internalized by the generators. These include:Overbuilding and low effective capacity: Intermittent sources require substantial overcapacity because of low and weather-dependent capacity factors. Modeling shows the need for large volumes of wind and solar (often well over 100 GW in high-renewables scenarios) to meet far lower average demand, while firm backup (gas plants running at very low capacity factors) must still be retained for calm, dark periods.
Grid and transmission expansion: Remote wind (especially offshore and Scottish) and solar require expensive new transmission. Network costs form a large share of the modeled savings when firm power is prioritized instead.
Curtailment and constraint payments: When wind or solar output exceeds demand or local grid capacity, operators are paid to switch generation off. These costs have already reached hundreds of millions to billions annually and are projected to rise sharply (examples cited in parliamentary debate include multi-billion figures by 2030).
Balancing, reserves, and backup: Volatility requires more real-time balancing services, frequency response, and underutilized firm capacity. Storage remains limited relative to multi-day or seasonal lulls. The full system cost of offshore wind, once these extras are added, has been argued to approach figures far higher than headline LCOE claims (one illustration placed it near £230/MWh in the context of prevailing wholesale prices around £97/MWh).
Policy levies and market design: Carbon pricing on electricity, legacy renewable obligation subsidies, Contracts for Difference strike prices that have risen after earlier declines, and recovery of network/balancing costs primarily from demand all inflate bills. Fixed costs rise even as overall electricity consumption has fallen in recent decades, creating a feedback loop of higher unit prices.
Power generation accounts for only about 10% of UK emissions (already down dramatically since 1990). The remaining 90% lie in heating, transport, and industry. Making electricity expensive undermines the very electrification (heat pumps, EVs) needed for deeper decarbonization and raises living costs and industrial competitiveness. The Onward/Transira work shows that an 80%-clean firm-power pathway still delivers large emissions reductions while avoiding the extreme costs of squeezing the last percentage points of carbon out of the power sector first.
Claire Coutinho has repeatedly highlighted that the previous full-system costing work was canceled, that strike prices in recent auctions have not delivered the promised continuous cost declines, and that overbuilding intermittency locks in higher bills for decades through long-term contracts. Official grid-operator and other analyses have also flagged higher system costs from rushing Net Zero power targets.
Gas price spikes after 2021 and the UK’s marginal pricing system (where gas often sets the wholesale price) matter, but they interact with and are amplified by the policy-driven system architecture. Countries with higher shares of nuclear or more flexible firm capacity have generally faced lower structural pressures.
Britain prioritizes intermittent generation shares and rapid decarbonization targets over system-cost realism and firm capacity. It produces higher fixed costs (networks, balancing, underused backup), policy levies, and reduced industrial competitiveness.
Making electricity cheap is the prerequisite for successful electrification, economic growth (including data centers and AI), and sustained emissions reductions. Prioritizing firm, reliable, lower-system-cost power—nuclear scaled up, gas as flexible bridge where needed, and renewables in roles that do not impose runaway integration costs—offers a more pragmatic route.
Energy News Beat: continue reading
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(UKR)