I guess I must be one of Ed Miliband’s ‘siren voices’. Writing in the Observer today, the Energy and Climate Secretary complains about people he thinks:
‘Would keep Britain locked in dependence on global markets we don’t control. They will also make up any old nonsense and lies to pursue their ideological agenda, the latest example being their attempt to use the crisis facing the steel industry for their deeply damaging agenda.’
He goes on to assert: ‘UK Steel says that it is the “UK’s reliance on natural gas power generation” that leaves us with higher prices than international allies – not too much clean energy, but too little.’
Steady on, Ed. Let’s leave aside, for the moment, Miliband’s Trumpian disdain for global markets, his somewhat out-of-context UK Steel quote comes from a report published last September by the steel industry trade body complaining that British steel makers have to pay up to 50 per cent more for their power than French and German competitors. Nowhere does it call for more of Miliband’s wind and solar farms. Its biggest beef is with higher network costs in Britain, which it wants lowered, especially for heavy industrial users. As for wholesale electricity costs, it notes that they are lower in Germany thanks to the continued use of coal, and in France because of its higher contribution from nuclear.
Gas-generated electricity is expensive in Britain because of the way we are using it. Gas is increasingly being used for short-term back-up, often at short notice when wind and solar fall short of forecasts. It should not be a surprise that owners of gas power stations charge a lot more per unit for switching on their plant a few hours a week than they would do were it running continuously.
The problem is compounded by idiotic Marginal Cost Pricing, where the price for all electricity, generated by whatever means, during each half hour period is set by the most expensive form of electricity – which is usually a gas plant being used for a short burst of power. It is rather as if I went to the supermarket wanting a dozen bottles of Prosecco, but when I get there I found they only have 11 bottles. I take them and put one bottle of vintage Veuve Clicquot champagne in my trolley to make up the 12 – and when I get to the checkout I find myself being charged for 12 bottles of Veuve Clicquot.
There is a further contributor towards high gas prices in Britain: we are becoming ever more dependent on imported liquefied natural gas (LNG), which now accounts for a quarter of gas imports. This is necessarily more expensive because around a tenth of the energy contained in the gas is consumed in the liquifying and regasification process.
If gas power is really so expensive as Miliband makes out, how come the US has so much lower electricity prices when it generates a higher proportion of its power from gas than the UK? In 2023, 32 per cent of Britain’s electricity came from gas, compared with 43 per cent in the US. And yet UK industrial users are paying an average of 25.85 pence per kilowatt-hour for their electricity (including taxes), compared with the equivalent of just 6.48 pence in the US.
By the way, the US also generated a markedly lower percentage of its electricity from wind and solar in 2023 – around 15 per cent – than the UK (34 per cent). If we followed US policy of encouraging energy self-sufficiency through fracking of shale gas, didn’t have the cost of subsidising wind and solar plants and backing them up at short notice, didn’t have to pay wind farm owners billions in ‘constraint payments’ to compensate them for when they are generating too much power to be fed into the grid, and didn’t also face the cost of reconfiguring the national grid for dispersed wind and solar farms, we could be enjoying US-style energy prices, too.
If that makes me a ‘siren voice’ Ed, sorry, but I am not going to stop pointing this out. There is only one of us talking nonsense and lies – and it isn’t me.
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