Ending The Wind Delusion

The UK's Quixotic Dash For Wind Can Only End Badly. It's Time To Follow The Evidence...

Domestic energy is in the news. Firstly OFGEM has announced that the energy price cap is to fall. The media interpret this as meaning that household energy costs will reduce and no doubt Mad Ed will (falsely) attribute this to his green energy plans. On top of that, Reform UK has announced that it will reintroduce the pensioners winter fuel allowance. Cue a battle between Labour and Reform for the pensioner vote.

Both are sideshows and a distraction from dealing with the fundamental problem. The price cap reduction is worth around £136 per year. The winter fuel allowance was £200 or (for those over 80) £300 per year. The reality of domestic energy costs is a little different and less rosy. The real driver of the energy cost is Net Zero, which adds some £600 per household per year to our bills. That’s set to increase to £700 by 2030.

Blinded By the Cap

The energy price cap constrains the total domestic electricity and gas bill per household. It does not constrain commercial electricity and gas bills, nor the price of the petrol or diesel that you put in your car. (If you have an electric car it does limit your home charging costs, but not anywhere else). Domestic electricity consumption is about 35% of UK demand. Gas consumption is a similar proportion. The commercial (i.e. non-domestic) market is twice the size of the domestic one.

Energy companies exist to make a profit and they compete for customers with their offerings of price per kWh, standing charges and, for large commercial customers, more complex factors like reactive power charges, availability charges and maximum and minimum amounts. The price cap limits energy company profits in the domestic market, so they make up the shortfall from charging businesses at a higher rate. According to the ONS, the average cost of non-domestic electricity has risen by 75% since 2021, an inflation busting annual increase of 15% per annum.

Those businesses pass on their energy costs to you, their customers – along with all their other costs and a profit margin. What you save spending on your domestic energy bill due to the price cap you sacrifice in the increased price of the goods and services that you procure. The price cap works well for the poor, who purchase less. Everyone else pays more for their goods and services, including essentials like food because everything uses energy.

The insidious effect of the price cap is that it masks the costs of Net Zero. Whether it was intended to do that is one for the conspiracy theorists, but that’s what it does. If your domestic energy bill is reducing you might believe the government lie that renewable energy is cheap because wind and the sun are “free”. If that were the case, successive governments would not have had to throw a wall of subsidy money at the energy companies to build wind farms and solar parks. Vince Dale, Labour super-donor, would not have a net worth of £100M.

Net Zero Is Expensive

How much has the government spent? A new report by the excellent, expert and reliable Kathryn Porter’s Watt Logic puts the total cost of Net Zero subsidies at £220 billion since 2006. That comes out at £8,000 per household over some 15 years or so.

Who paid? You did.

The current cost is £17 billion a year, which will rise to £20 billion by 2029, or £719 per year per household. Who will pay? You, of course. Remember, that’s just the Net Zero subsidy elements of your bill. On top of that you will pay for the electricity and gas, the standing charges and the rest of it.

The real impact of the reduction in the energy price cap is increased energy costs for businesses. Businesses are already struggling with rising employment costs and a stagnant economy. Increasing their energy cost will not fuel growth.

The much touted £200 per household saving comes out at some £3 billion more disposable household income. That’s a rounding error an economy where the non-government spending is some £1,600 billion. As the government’s economic policy (read idiocy) unravels that £11 per month is far more likely to disappear to the treasury in yet further tax rises and the increased price of goods. Growth will remain elusive.

British Electricity Is Expensive

The figures are stark. Courtesy of Net Zero the UK’s domestic electricity prices are the fourth highest in Europe. Domestic electricity in London costs 50% more that it does in Paris. It’s even worse for industry. As the chart below shows (from UK government data developed from International Energy Association (IEA) data)

The UK’s industrial electricity price is one of the highest in the world. Swedish electricity is a third of the UK cost, US electricity is just one quarter of UK’s cost.

Red Ed often blames the UK’s energy price woes on “international gas markets.” Yet the IEA’s data in the chart below shows that the UK’s gas price is not excessive. Although again, it’s way higher than the US one. (Aside, if I can work this out in my cab why can’t BBC fact check? Or any other journalist interviewing Mad Ed).

This data came from a UK government website run by Mad Ed’s own department, the Department for Energy Security & Net Zero . The message is obvious and clear. A three year old could understand it. Yet that department’s Civil Servants (whom we pay for) seem unable to explain the realities of the world to their master. Why not? Are they unable to work this out? Are they afraid for their jobs? Or are they Net Zero fanatics too? The Permanent Secretary, Jeremy Pocklington, has a PhD in Economics and Social History (from Oxford, natch!) – surely he must understand this. (If he doesn’t, why is he in the job?)

The Wider Costs

This is not an abstract economic comparison or a political point. The UK’s absurdly high energy prices are costing jobs and destroying wealth. Net Zero is to blame. The steel industry uses a lot of electricity to power its electric arc furnaces. With an energy cost two to four times higher than its overseas competitors is it any wonder that it’s struggling? The troubles of the Sheffield blast furnaces (caused by emissions legislation) are as nothing compared to the impact of soaring electricity costs on the electric arc furnaces that currently make most of the UK’s steel.

It's not just heavy industry. The food chain includes vast amounts of cold storage, all running on electricity. There’s so much of it consumes 3.5% of all UK electricity, the cost of which ultimately is recovered through the food you buy. Food price inflation doesn’t just happen at the farm gate – Net Zero and the price cap play their part.

Commerce uses over 20% of the UK’s electricity – every bank, insurer, hotel and shop needs electricity and passes the cost on to you. The government machine itself uses about 5% of the electricity that it is making needlessly expensive. You pay for that too.

Data centres use vast amounts of electricity, currently 2% of the UK’s total consumption. The AI revolution will quadruple that (or more) by 2030. Or will it? Why would you build a data centre in the UK if it costs three or four times as much to power as it would in France or America? The government is currently pinning its hopes (and our future) on AI to solve all its problems. Fat chance in a country where electricity is increasingly rare and exorbitantly overpriced largely due to a central tenet of government policy.

The money that the government has forced you to spend on Net Zero you could otherwise have spent on some other service or product, probably in the UK. As it is much of the money you are compelled to pay for wind energy goes overseas. In 2022 alone the UK paid £2.5 billion to foreign state owned wind farm operators. Over 81% of UK windfarms are foreign owned. We don’t have a major wind turbine manufacturer in the UK - presumably the expensive electricity and steel don’t help.

Wind Power Bankrupts

The wind farm industry is struggling. Danish Company Orsted has just pulled out of the Hornsea 4 windfarm project as it couldn’t see a way to deliver it profitably. That is with a guaranteed price of over £91 per MWh (in 2025 money). If Mad Ed wants them to proceed he’s going to have to offer more of your money. And Mad Ed does need them to proceed as his deranged plan to “green the grid” requires trebling the amount of wind generation by 2030. That’s in just five years’ time.

It's not just Orsted. Last year Vattenfall pulled out of the Boreas project . Saying it could not make a profit. BP, which in 2006 its chairman Lord Browne decided should stand for “beyond petroleum”, has listened to its shareholders and abandoned it’s plans to massively increase its renewables business. It is now back to focussing on oil and gas. BP has also dropped it’s plan to reduce its oil and gas production (although of course Mad Ed’s oil and gas levies undermine the profitability of its UK operations).

It's not just the UK. Denmark has just had an embarrassment when no one was interested in building wind farms at the suggested prices. The same thing happened in the UK in 2023, when the rejected price was £44 per MWh (£55 in today’s money. In two years the offshore wind subsidy has increased by 65%). Like the UK, Denmark will either have to commit to higher electricity prices or wise up.

Wind power is not cheap because wind farms are not cheap to build, wind speeds do not correlate with demand and storing electricity is very expensive (and nigh on impossible to store in volume). That’s all simple physics and economics. Anyone with double figure IQ should be able to work it out. (Or, brazen plug, read my book which explains how complicated Net Zero is).

Emissions Trading Scheme

It’s not only Mad Ed who is destroying the economy in pursuit of the Net Zero delusion. His boss, the Toolmaker’s Son, has just signed us into the EU Emissions Trading Scheme (ETS) as part of the collateral damage of reversing Brexit. The ETS works by allocating companies in selected sectors a quota for emissions, reducing that quota every year and fining them heavily if and when they exceed the quota. The list of sectors is expanding; it currently includes power generation. Around 35% of the UK’s electricity comes from fossil fuel generation, mostly gas. Burning gas emits CO₂

Companies comply with their reducing ability to emit CO₂ by either buying other company’s emission rights (costly), finding some new technology (expensive and risky) or paying the fine (increasingly expensive). Whichever route they go, the bill gets passed onto their customers. If the company is an electricity generator the cost of electricity goes up again. Note that this is additional cost, beyond the cost of the gas and the Net Zero subsidies.

Of course, no company can be forced to build a gas power station (yet). If the construction and operating costs rise, 35% of the market pays a price limited by statute and the other 65% is struggling in a stagnant economy the economics of the risk / reward balance may not be attractive. The would be operator will look for other locations in other jurisdictions. Good for them, not so good for the UK as we’re awfully short of power generation, even when the wind blows. As nuclear power stations reach the end of their lives the generation burden will fall more heavily on other generation technologies – of which the most reliable is gas. Net Zero is going to put the lights out.

Emissions Are Moving

This quixotic drive for a green grid is part of the attempt to reduce CO₂ emissions to avert the perceived thread of the adverse impacts of global warming. Even if you believe that CO₂ emissions are the sole driver of climate change, you must accept that Mad Ed’s drive for Net Zero achieves nothing. While it might reduce the UK’s emissions a little, over 75% of the UK’s total energy comes from hydrocarbons, not electricity. Greening the grid won’t change that any more than it will change the reality that the UK’s CO₂ emissions (on a territorial basis) are just 1% of global emissions. In terms of the battle against global warming, should you wish to fight it, Net Zero is an irrelevance.

If might actually be worse than that, if you care about such things. Exorbitantly priced electricity will continue to push businesses to countries where their operating costs will be lower. As the charts above show, Mad Ed’s Net Zero means that’s pretty much anywhere outside the UK. It’s not just manufacturing; the IT and data sectors consume vast amounts of electricity; they’ll go where electricity is cheapest, which might not be where it is cleanest. Net Zero could even increase global emissions.

What Green Jobs?

So Net Zero isn’t just costing your household £750 a year, it’s driving away jobs and wealth creation. That’s a huge problem for the UK economy, stuck as we are with a spiralling national debt, weak growth (at best), rising inflation and the prospect of rising interest rates both domestically and on the bond markets that underwrite the government’s deficit. In a sensible government the Chancellor would end the Net Zero nonsense.

Unfortunately in the spring statement it’s clear that Rachel from accounts has been suckered by the green growth delusion – that somehow the rest of the world will be seeking our green energy expertise and that this will lead to lots of green jobs. as economic recovery.

Since Mrs May inflicted Net Zero on the UK in an act of spite we’ve been waiting for this green fuelled economic recovery. The ONS published experimental data on green jobs. The chart below summarises the job creation to date.

Of the 124,000 “green” jobs created perhaps only 20,000 accrue to Net Zero. “Waste” and “water” sectors relate more to population size than green energy adoption. The “charities” and “other” categories certainly don’t produce energy or products (although they may generate a lot of hot air). In almost a decade 20,000 green energy jobs created isn’t very impressive given the UK’s workforce is some 37 million. If Reeves is hoping that Net Zero is going to save the economy she is badly wrong.

And the full cost of Mad Ed’s ambition is terrifying. NESO, the National Electricity System Operator reckons delivering Net Zero in the energy network will cost about £3,000 billion, which is unfortunate as the UK doesn’t have that sort of cash to hand. It’s more than the entire national debt which costs us £100 billion a year (and climbing) in interest payments - and we’re having to borrow to pay that.

While the enormous greening cost could in theory be recovered via yet another levy on the cost of electricity, someone must front up the cash to build. If they could be persuaded to accept the interest rate of a UK 50 year gilt the interest cost would be £141 billion a year. That’s £5,000 a year per household and, as ever, it’s the UK consumers and taxpayers who will pay. Net Zero has put us on the path to penury.

Avoiding Penury Is Simple

The good news is that it’s easy to fix. We just cancel Net Zero.

No new subsidies would mean electricity costs would start to fall. No need to spend £3 trillion we don’t have, more money in consumers pockets to fuel growth and increasingly competitive electricity costs to support businesses, who could then grow. That growth would lead eventually to a balanced budget, reducing government borrowing costs and a reducing tax burden. The money we’re not throwing away on the Net Zero delusion could be reapplied to building schools and hospitals as well as sorting out the transport infrastructure.

Net Zero isn’t saving the planet (if it needs saving) because it drives energy consumers to other, higher emissions countries. Net Zero is destroying our economy, our bank balances, our future and our country. Our politicians could end the madness, yet they don’t. either because they don’t understand this or because they lack the courage to confront the green lobby that they have created.

It’s time to get a different sort of politician.

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