Britain’s new generation of nuclear power plants will not come cheap (Hinkley Point will cost £46 billion) and they will not come soon (they take decades to build). Nevertheless, in Ed Miliband’s confirmation that the Sizewell C plant will go ahead, we can discern a belated governmental recognition that renewables alone will not provide reliable, 24/7 power.
The same logic underpins the government’s more speculative effort, also announced on Wednesday, to create, via a partnership with Rolls Royce, a generation of small, modular reactors (SMRs). Britain’s extraordinarily high energy prices — some of the most expensive in the world — risk making our decarbonisation efforts a losing battle. These investments in nuclear power, expensive though they might be, are unequivocally preferable to our current situation.
If we do not make better use of nuclear fission, we will fail in our ambitious and perhaps foolhardy attempt to reach Net Zero status by 2050. At some point, we might ourselves pull the plug, as it were, on this quixotic endeavour. In April, Tony Blair warned that the Net Zero push was, in its current form, “doomed to fail”. Voters, he said, “feel they’re being asked to make financial sacrifices and changes in lifestyle when they know the impact on global emissions is minimal”. Ask too much of voters, in other words, and they will punish the politicians who are driving down their living standards. They will fling out the baby as well as the tepid bathwater. In pragmatic spirit, Blair’s research institute called for acceptance of the temporary use of fossil fuels, and for the deployment of carbon-capture and other mitigation measures — as well as for the use of SMRs.
Naturally, Blair’s intervention incurred strong reactions. Critics of Net Zero were glad to see that a prominent figure of the centre-left had, at least partially, conceded to their arguments. Committed supporters of Net Zero saw it as a betrayal and another example of Blair being a closeted Right-winger. Internal Labour voices were apoplectic that their former leader decided to air his opinion on the eve of some particularly painful local elections.
But polling is on Blair’s side, with 59% of the public prioritising economic growth over net-zero policies. There is a shift among the elites, too, or at least the beginnings of one. Respectable voices have gradually become more openly sceptical of Net Zero. Paul Johnson, the former director of the Institute for Fiscal Studies, called for an “honest conversation about Net Zero” as early as 2023. Dieter Helm, professor of economic policy at Oxford and a former senior government advisor, has heavily criticised the rollout of wind power and the offshoring of emissions via deindustrialisation. Javier Blas, probably the best-known energy and commodities columnist, has called for “electricity realism”. JP Morgan analyst Michael Cembalest, via his annual energy reviews, highlights the challenges of electrification.
Unlike Blair, these voices have not called for grand pivots to new technologies. Instead, they are asking that Net Zero be seen as what it is: a form of austerity, and not a catalyst for growth.
One thing these elite voices share is incredulity at the claims of Net Zero advocates. The first claim is that renewables from wind and solar energy are cheap, even as their subsidised entry into the electricity mix correlates with the rise of British energy bills.
The second claim, that “green jobs” can revitalise Britain’s industrial base, is falling to pieces. Steel mills and chemical refineries are closing, but they are not being replaced with gigafactories and electric vehicle plants.
Thirdly, there is the assertion that we can be a global leader and make a substantial change to emissions. But it is blindingly obvious our policies do not have any effect whatsoever on global emissions, which reach new records being set every year.
This disillusionment goes beyond Britain. Mark Carney is a staunch advocate of Net Zero, yet he nonetheless kicked off his premiership of Canada by scrapping the unpopular 2019 consumer carbon tax. The Trump administration, unlike the Democrats it ousted, is uninterested in the whole venture of Net Zero.
The truth is that the much vaunted “energy transition” is only a portion of the global energy story. We have heard ad nauseam about the growth of solar photovoltaics and batteries. We hear less about the fact that coal, declared dead by Boris Johnson at COP 26 in 2021, is generating electricity at record levels globally. Chinese coal mine production reached record highs in late 2024.
To the extent coal has declined, it has been replaced by another hydrocarbon, natural gas. Japanese banks and corporations, at the government’s behest, have been among the largest funders of liquified natural gas infrastructure. In terms of final energy consumption, we are the same fossil fuel civilisation we were at the start of the millennium.
Faced with increased pressure, advocates of Net Zero argue that the problem is the underlying electricity pricing system. Net Zero advocates argue that fossil fuels set the day-ahead price of electricity 98% of the time, compared to 58% of the time in Europe, and that this is the main thing pushing up bills.
This implies — falsely — that intermittents are setting prices on the continent. Even in Denmark, where wind is over 50% of the generation, intermittents do not set prices, because they are never meeting all demand. Instead, prices are often set by reliable hydroelectric and nuclear plants, assets Britain does not have in abundance. When factoring in subsidies, renewable prices are usually higher than those for gas. Gas wholesale prices have also been increased artificially by carbon costs, which consistently represent over 20% of gas wholesale prices.
This is detrimental to the government’s overriding aim to electrify transport and heating.
“Respectable voices have gradually become more openly sceptical of Net Zero.”
Gas costs are also increased by the sheer number of renewables coming onto the grid, which leads to lower utilisation. The capacity factor of combined cycle gas turbines in Britain has declined from 71% in 2008 to 33% in 2023, leading investors to cancel new gas plants.
All this adds up to an increasingly convoluted energy system. The renewables buildout has given us more electricity generation capacity, at least in theory, than ever. But because of its intermittent nature, it is supplying less electricity to a country with declining electricity demand, all for a higher price.
Questions of whether this painful transition is being done well or not are perhaps less important than asking what it is all for. It is now clear that British carbon reductions have no bearing on global emissions. If Britain’s sum contribution is to deindustrialise while emissions increase globally, is our example really transferable to others?
One important question here is the extent to which the Net Zero economy is significant or desirable. Successive governments have promised an explosion of green jobs, but my research tells a different story. Looking at the government’s estimates, I found that manufacturing related to wind turbines and solar panels represented £2 billion in annual turnover in 2022, which is rather less than the £5 billion turnover in biscuit production and the £3 billion opportunity in fish and crustacean processing.
What if we widen the net? In 2022, “green” manufacturing, including hybrid vehicles and energy-efficient light bulbs, had a total turnover of £19 billion, 3% of the £650 billion turnover of British manufacturing. Alarmingly, manufacturing, green or not, has experienced next to no growth since 2006, when accounting for inflation.
All but the most devotedly neoliberal analysts would agree that Britain needs a strong manufacturing sector. But, as things stand, British industrial growth is contingent on that same growth being “green”. This has had a deleterious effect on certain sub-sectors. Take the gas boiler market, of which Britain has Europe’s most valuable. The Government seems intent on replacing gas boilers with heat pumps.
Or take Britain’s two largest goods exports: petrol-powered cars and internal combustion engines. These are set to be banned by 2030. At the best of times, we should be sceptical of governments that pursue industrial policy by coercing consumer choices. This is especially when governments do not even prioritise their countries’ industrial strengths. The threatened closure of the Scunthorpe steel mill by its Chinese owners, and its hurried re-opening by a Government whose energy policies had contributed to the closure, is a case in point. To keep the plant alive, the government even secured a ship’s worth of coking coal.
So what is to be done? Blair’s recommendations are essentially a series of technological Hail Marys: AI, carbon capture, fusion energy, space-based solar arrays that can continuously produce energy, and solar radiation management (SRM). The latter is a catch-all term for techniques that will reflect sunlight into space, such as injecting reflective aerosol particles into the stratosphere. In essence, it is a call to take control of the climate through terraforming.
This is not climate denialism; rather, it is the view that the best way to deal with climate change is to actually reengineer the climate. For the many elites whose number one issue in Britain is economic growth, this is a far more compelling vision than the material austerity advocated for by Miliband, or the more explicit calls for degrowth from academics like Kate Raworth.
The problem is that when a 20-year strategy begins to fail, there is little scope to reverse course quickly. The government, and any aspiring opposition, now faces the prospect of undoing the debacle.
Unfortunately for them, there are few pathways to quickly alleviate the problem of high prices. Even if the government shifts against Net Zero austerity, the coal plants have already been blown up. Still, in an optimistic scenario, natural gas exploration could be expanded in the North Sea, and fracking could be allowed to develop in Lancashire and Lincolnshire. Despite gloomy estimations of the size of potential reserves, investment into further exploration could be spurred by lower taxes.
The counterproductive carbon taxes on electricity generation also need to be cut. When the government’s stated plan is to electrify everything, placing a hefty tax on wholesale electricity costs makes little sense.
One temptation will be to subsidise either producers or households at the expense of the other. The government could induce a recession by placing big bills on consumers to shield steel mills and refineries from high prices. Or they could wave goodbye to heavy industry and give consumers a temporary respite. With consumers braying and producers dropping like flies, politicians will be in an unenviable position determining who gets preferenced.
Instead, the Government is considering another way to reduce costs: switching to zonal pricing. In basic terms, this means splitting Britain into a handful of regions, with their energy prices reflecting their local generation mix. The argument is that this will reduce network costs and make prices much cheaper in areas of abundant renewables, particularly Scotland.
However, such a project is fraught with uncertainty and faces near-blanket opposition from renewable generators, manufacturers, and most utilities. The strongest argument made for zonal pricing seems not to be that it will make our energy cheap, but that it is the one policy move that will limit the ever-increasing costs of our convoluted grid.
While Scotland, a peripheral part of the broader economy with very little heavy industry, might benefit, prices in the South East would be likely to rise. This is alarming, since 75% of data centre capacity is based in London and the South East. With data centres expected to be a growing share of total electricity consumption, zonal pricing is at the very least risky.
More broadly, a complicating factor for Britain’s energy situation is that it is only one of many strategic problems faced by policymakers. The global trading system is benefiting east Asian producers at the expense of Western manufacturers. Western attempts to rectify this, such as with tariffs, are contributing to further disruption. There is a lack of housing affordability. There is demographic ageing, and the favourite tonic for labour shortages, mass immigration, is proving financially counterproductive and politically ruinous.
“The government could induce a recession by placing big bills on consumers to shield steel mills and refineries from high prices.”
With so many red lights flashing, spending political capital and administrative bandwidth on fixing the mess of British energy is easier said than done. Perhaps most importantly, the state’s capacity to implement significant reforms, or build complex infrastructure on time and without eye-watering expense, is failing. As a result, even sensible suggestions like more nuclear fission plants are fraught with danger. South Korea’s state-run nuclear corporation KHNP has shown that it is possible to build this decades-old technology quickly and at a reasonable cost, not just in Korea but in the United Arab Emirates.
So while Miliband doubles down on Net Zero and Blair dreams of terraforming, what can energy realists do? The immediate task of reducing prices and balancing the needs of producers and households looks daunting.
First, we need to move away from hard deadlines on massively reducing emissions. We also need to move away from directing industry and consumer choices via hard bans on established technologies like gas boilers and internal combustion engines.
There is a significant appetite in the policy world for nuclear power. In recent years, fusion has become a hyped-up technology. But the energy density of fission is already by orders of magnitude greater than that of any other modern energy source. The dangers are overblown, and the current supply chain is sufficient to supply the world’s reactors for hundreds of years. Reusing spent fuel via breeder reactors makes fission effectively renewable.
While small modular reactors are promising, large reactors are already being built at scale in Korea and China at an impressive speed. Alongside the Centre for British Progress, I have laid out a plan for building 200 terrawatt hours of annual nuclear generation capacity, or 50% of total generation, by 2040.
Nuclear power offers zero emissions, and any new plants could have lifespans approaching 80 and 100 years. Britain’s internal capacity to build the plants is limited, but it would be possible to set up a joint venture with South Korean firms. Dedicated researchers are already mapping out the regulatory barriers we need to target to get plants built quickly.
Fission has challenges in terms of financing, and SMRs, while promising, are not proven. But fission is nevertheless a route to cheap clean power that has already been demonstrated elsewhere. Miliband’s material austerity is becoming increasingly untenable to elites, and Blair’s technological solutions are aspirational. In the meantime, the government is left to mitigate the costly consequences of its failed policy.
