Milibands empty energy promise

Though not quite up there with history’s great political texts, Ed Miliband’s letter this week to the director of the ESO, which runs Britain’s national grid, is a rather important document. It reveals – or confirms – that Labour has committed itself to decarbonising Britain’s electricity system by 2030 without really having any idea of how that can be done. Miliband described this letter as a ‘formal commission… to?provide practical advice on achieving clean power’.

That is all very well, except shouldn’t Miliband have sought this advice months ago, before pledging to achieve net zero on domestic energy by 2030? This week was supposed to be the big reveal: we would learn how this target – considered unreachable by many – is going to be hit. But Miliband, it seems, doesn’t have the first idea as to how the country can decarbonise the grid, still less by 2030. His agenda and the decarbonisation deadline are starting to look like a ludicrous bluff.

The ‘embodiment’ of Labour’s agenda was supposed to be a new company: Great British Energy. ‘A new home-grown energy company,’ Keir Starmer promised, ‘like Orsted in Denmark and Vattenfall in Sweden.’ There was much talk about where it would be based, and this week we found out: in Aberdeen.

National Grid directors have warned that if Britain sticks to this policy we face blackouts by 2028

The conceit is that the project will mop up all the jobs that will be lost in the oil industry. Except that GB Energy will not be a company generating energy at all; it is instead a name given to an investment scheme.

A few weeks ago, Miliband trumpeted that GB Energy would partner with Crown Estates to create up to 30 gigawatts of new offshore wind developments by 2030. He was so excited that it seemed unfair to point out that the Crown Estate had already set that target in November under the Tories. The 20?million homes which that energy is supposed to power would be lucky to get electricity by 2040, given the wait for new projects to be connected to the grid.

Miliband’s plans are vague to the point of nonexistent, yet he was very specific with his pledges. ‘Great British Energy is part of our mission to make Britain a clean energy superpower by 2030,’ we were told before the election, ‘helping families save ￡300 per year off their energy bills.’ Instead, we now find out that bills are going up – with the rise in the Ofgem price cap next month adding ￡149 to the average bill.

‘A direct result of the failed energy policy we inherited,’ Miliband fumed when Ofgem announced the news, ‘which has left our country at the mercy of international gas markets controlled by dictators.’

Even this claim does not stand up to scrutiny. For one thing, the global gas market is not in the hands of dictators: by far the biggest producer is the US. And on the home front, when David Cameron came to power, just 3 per cent of electricity was produced by wind and 0.01 per cent solar. Now, it’s 28 per cent from wind and 4 per cent solar. Few other countries have embraced wind energy so enthusiastically – and all this in spite of Cameron’s de facto ban on onshore wind turbines. Only China generates more electricity from offshore wind.

Boris Johnson’s government was ambitious to a fault, committing to a target of decarbonising the UK electricity system by 2035 – with 95 per cent of electricity to come from green sources by 2030. On its ambition for green power, the previous government was, therefore, very nearly aligned with Miliband. It is hard to escape the conclusion that Miliband brought forward the 2035 target by five years just to one-up the Tories. He thought it sounded good, positive and progressive – and didn’t stop to ask whether the Johnson 2035 deadline may itself have been bluster. Johnson and Miliband simply set their targets for presentational reasons and decided to worry about the details later.

Wind and solar now produce about 34 per cent of British power; to hit the 2030 target, that figure would have to double, according to a recent study by Cornwall Insight.

Assuming all of Miliband’s plans work out, that analysis said, the most he could hope for is 44 per cent. To call his plan ‘ambitious’ – as so many still do – is to deny reality. It’s a demonstrable fantasy. He may carry out his pledge to double onshore wind capacity, triple solar power and quadruple offshore wind, but even this would not be enough when you factor in the biggest single problem: the national grid.

The grid neither has the capacity to transmit the required energy, nor to store the energy that will be required to support an electricity mix dominated by intermittent renewables. In private, directors of the part of ESO which oversees the distribution of electricity have warned that if Britain sticks to this policy we face blackouts by 2028. The company would do well to reply to Miliband’s open letter by giving a simple reply explaining the situation. The present system was built up to distribute power around the country from a handful of large coal-fired power stations based in the Midlands and other areas of high industrial demand for energy. It is certainly not configured well for shifting energy from wind and solar farms, which often tend to be in areas remote from demand, such as in the North Sea or the Scottish Highlands. Wind and solar power may well be plentiful in such places, but quite often the grid cannot cope with what they generate.

The grid is being beefed up. But work is running a long way behind Miliband’s ambitions, as the GMB general secretary Gary Smith has repeatedly tried to warn the Labour party. Some of today’s wind farm developers have been told that, on the current trajectory, it will take up to 15 years to connect them to the grid – which isn’t much help when you are trying to decarbonise the grid within six years.

Let’s take, for example, the Viking wind farm in the Shetlands, which finally came on-stream last month. It was first proposed in 2009 – so long ago that at that time Miliband was energy secretary under the last Labour government. But in Viking’s first month of operation, most of the energy it might have generated could never have been fed into the grid because of lack of capacity. According to the Renewable Energy Foundation, Viking received ￡2.5 million worth of ‘constraint payments’ for energy that couldn’t be fed into the grid. As solar and wind farms proliferate faster than the grid can cope, ESO thinks these payments could grow to ￡2.5?billion a year. Needless to say, that cost will have to be covered by consumers’ bills.

Is it possible to build a new grid that could cope with Miliband’s new green age? A Royal Society report last year estimated that a system that used only wind and solar would require energy storage facilities a thousand times larger than Britain’s existing infrastructure (which consists of four pumped-storage reservoirs constructed between the 1960s and 1980s, plus a smattering of lithium battery installations.) As the Royal Society report put it, a UK grid dominated by renewables would require ‘far more energy storage than could conceivably be provided by conventional batteries’. A step change in battery technology is needed before it could become practical. That almost certainly isn’t going to happen by 2030.

Even if distribution were viable, wind and solar energy is not as cheap as it is often made out. You just have to look at Denmark, which has the world’s highest proportion of energy generated from wind and some of the highest electricity prices. Until recently, Miliband continued to assert that wind energy was ‘nine times cheaper’ than gas-powered electricity. His claim was based on a false comparison between the long-term guaranteed prices offered to the operators of wind and solar plants with the short-term prices paid to owners of gas power stations at the height of the energy spike in August 2022.

Since then, gas prices have plummeted, while the cost of building wind and solar plants has soared. When interest rates and commodity prices were low, the cost of building wind turbines fell to the point in 2022 when wind farm operators were prepared to sign contracts to produce power at ￡37 per megawatt-hour. By September 2023, when the government held an auction for offshore wind – setting a maximum price of ￡44 per megawatt-hour – it received not a single bid. The dream of being able to buy low-price wind power was shattered.

In order to attract interest for the latest auction, Rishi Sunak’s government pushed the maximum bid price to ￡73 per MWh. When the results were announced this week, the successful offshore wind projects had apparently bid between ￡54 and ￡58 per megawatt-hour – which looks like reasonable value until you realise that all these figures are still somewhat randomly set at 2012 prices and have not been adjusted for inflation. The actual prices charged by the energy companies do increase with inflation, however, and in reality this year’s successful bids are between ￡75 and ￡82 per megawatt-hour.

Miliband says he has been ‘getting the offshore industry back on its feet’. He does not admit that the long downward trend in the cost of renewable energy has just been reversed with a jolt. His promise to save consumers ￡300 a year on our energy bills, by the way, originated with a study by Ember – a thinktank funded by various environmental groups – which used last year’s electricity prices and so is already out of date. The same Ember study predicted that Britain could become a major exporter of electricity. That would require a very sharp turnaround in the country’s ever-increasing reliance on imported electricity: 14 per cent of supply, at the last count.

And what about nuclear power? Even Hinkley C, the nuclear plant being constructed in Somerset, is unlikely to get online by 2030. At present EDF, its developer, estimates an opening date between 2029 and 2031. Sizewell C, the site in Suffolk which was given the go-ahead by the Sunak government, won’t be ready either – and nor will any of the yet-to-be-realised small nuclear reactors. Indeed, by 2030 Britain’s nuclear output will be lower than it is now, as older reactors reach the end of their lives.

Britain has a big energy problem. But instead of starting an honest conversation that looks at the actual price of wind and the issue of the National Grid, the Energy Secretary seems to be doing his best to cover up his lack of a realistic agenda. His only hope now is to keep blustering and pray that the voters somehow don’t notice.

Published in the Spectator magazine 7th September 2024 by Ross Clark