Net Zero: The future of British electricity
The Reframer | No. 04.2024
Britain has just shut down its last coal-fired power plant, becoming the first Group of Seven (G7) country to phase out coal. The United Kingdom’s (UK) biggest steelworks – Port Talbot – recently closed its blast furnaces, and will now build electric-arc furnaces instead. Last week, the government announced £22 billion to fund carbon capture and storage projects. The National Energy System Operator (NESO) has just been established by the Department for Energy Security and Net Zero (DESNZ) to oversee the strategic planning and design of the country’s electricity and gas networks. And official data last month showed that Britain has the world’s highest industrial electricity prices.
The UK needs to have a national conversation about its electricity supply, the grid, the nation’s industrial competitiveness, and climate change. In particular, Britain should ensure it can build out the grid quickly and strategically, and for reforms of wholesale power markets to be implemented in time. This ‘Reframer’ reflects briefly on three areas which need to be considered in any discussion about UK electricity – in terms of electricity demand, supply, infrastructure, and implications.
Renewables will make electricity more affordable and the UK more resilient
It depends. Britain is increasingly using solar and wind energy. The cost of such renewable energy technologies has plummeted in recent years, and – with the help of schemes such as Contracts for Difference – they have become competitive with traditional fossil fuels. However, the People’s Republic of China (PRC) has a stranglehold over the solar industry, as well as minerals such as those needed for wind turbines. Unless countries develop alternative supply chains and manufacturing capabilities, an increasing reliance on these technologies for energy will also provide the PRC with economic advantages and leverage.
While renewable energy is a growing segment of the UK’s electricity mix, gas plays an important part in balancing the Britain’s grid because gas is dispatchable and can be switched on at short notice. This is useful when there is lower supply from intermittent energy resources, such as wind and solar. So, at present, flexibility in the electricity grid is predominantly supplied by gas generation, with approximately 50% of its gas being imported from the international market.
The global energy market has been highly volatile, particularly after the Covid-19 pandemic and Russia’s war on Ukraine. These events have disrupted global energy supply chains, pushing gas prices up significantly. The Carbon Price Support and UK Emissions Trading Scheme (UK ETS) have also increased the marginal cost of electricity. At present, gas tends to set the marginal price for the whole power system. While the large role played by gas will disappear if the UK can reach ‘Clean Power’ by 2030, prices will not necessarily go down – because it depends on whether system management costs would stay stable in that scenario, as well as the role of subsidies such as Contracts for Difference.
Britain also needs to be moving faster on nuclear power. At present, Britain is one of the most expensive places in the world to build new nuclear power plants. In the 1950s, Britain was a leader in nuclear power – but that engineering expertise has since been lost, as the nuclear industry atrophied in part through reliance on gas. The green transition is an opportunity for the UK to reinvest in its nuclear energy sector, and small modular reactors in particular should play a key part in the UK’s energy mix.
Okay, but the UK’s infrastructure is in a good position to handle growing demand for electricity
That’s not the case. Demand for electricity is increasing as industries are electrified. There is a small but growing demand for electric vehicles, and HM Government has set plans for 80% of new cars and 70% of new vans sold in Britain to be zero emission by 2030, increasing to 100% by 2035. There are plans to build many more data centres in the UK, but data centre power use may surge six-fold in ten years. In steelmaking, Britain has closed its coal-fired furnaces and will transition to electric-arc furnaces. Heating accounts for about 37% of total UK carbon emissions when including industrial processes, 14% of which is used to heat British households, and efforts are underway to electrify domestic, commercial and industrial heating, centred around scaling-up heat pump installations.
The UK has made significant strides in renewable energy adoption, but the grid infrastructure struggles to accommodate intermittent and decentralised renewable energy sources, such as wind and solar. Investment and upgrades in the grid are essential to support the rising demand from electric vehicles, heat pumps, and other energy-efficient technologies. Efficient energy storage solutions are crucial for managing fluctuations in renewable output, ensuring a reliable energy supply even during periods of low renewable generation.
Crucially, if Britain is to meet its Net Zero targets, it will need to either add or upgrade an estimated 600,000 kilometres of electric cables across the UK – something the country is not sufficiently prepared for. Put simply, there is little value in investing in renewables without investing in the grid.
Fine, but consumers will get behind businesses which show ‘green’ credentials
Not necessarily. Some argue that businesses which can demonstrate their ‘green’ credentials will attract consumers, and therefore companies will want to be based in the UK if it achieves Net Zero quickly. But businesses will always put cost ahead of environmental, social, and governance (ESG) concerns. Companies locating parts of their operations in a Net Zero country is a symbolically nice step for public relations, but it doesn’t automatically protect a company from accusations of greenwashing if other aspects of their operations are not sustainable. The UK is also at risk of offshoring the ‘dirty’ parts of its electricity generation, meaning its Net Zero credentials may be questionable. A commonly cited statistic, for example, is that Britain makes up just 1% of global emissions. This number is only true for emissions within the UK’s borders and does not account for things such as imported fossil fuels.
Dr Mann Virdee is a Senior Research Fellow in Science, Technology, and Economics at the Council on Geostrategy and leads the Caudwell Strong Britain project.
To stay up to date with Britain’s World, please subscribe or pledge your support!
What do you think about this Reframer? Why not leave a comment below?
 | A guest post by
|