As the UK charges ahead with plans to decarbonise its electricity system by 2030, a critical question hangs in the air: will the breakneck pace championed by Energy Secretary Ed Miliband come at a steeper cost to consumers compared to the previous 2035 target?
The necessity of transitioning to clean, domestic energy sources is widely accepted across the political spectrum, driven by the dual imperatives of supply security and climate action. However, the pace of this transition can have profound implications for the bills landing on households’ doorsteps.
Neso Report Leaves Cost Question Unanswered
Earlier this month, a report by the National Energy System Operator (Neso) lent support to Miliband’s argument that achieving a clean power grid by 2030 is “achievable,” albeit “immensely challenging.” However, the analysis stopped short of comparing the costs of the accelerated timeline against the original 2035 goal.
Instead, Neso assessed the 2030 scenario against a “counterfactual” assuming no significant acceleration. Under this comparison, it concluded that a renewables- and nuclear-heavy system could be delivered by 2030 “without increasing costs for consumers” – a claim disputed by some due to the underlying assumptions about gas and carbon prices.
Crucially, the report does not shed light on whether sticking to the 2035 timeline, or any date in between, would offer better value for money. It’s a glaring omission in the context of an undertaking that will see energy companies investing upwards of £40 billion annually, ultimately impacting consumer bills.
Risks and Rewards of Accelerated Transition
According to an industry insider, the consensus among those tasked with building the new infrastructure is clear: “The 2030 target is going to make it more expensive than it would have been to go to 2035 because you are working at breakneck speed,” they told us. “If you are going to put more risk into the system, it goes on to the price.”
These risks manifest in various ways. The upcoming auctions for offshore wind farm licenses, for instance, may need to order 10GW of capacity per year to hit the 2030 target – a staggering figure considering the total installed capacity in 2023 was only 15GW. Attracting sufficient bids may require the government to pay a premium, eroding “competitive pressure,” as alluded to in the Neso report.
Similarly, the £60 billion expansion of the UK’s high-voltage transmission network, with energy giant SSE potentially shouldering £25 billion of that burden, will necessitate fresh capital for the five-year sprint. Ofgem, the energy regulator, may find itself under pressure to be generous in setting returns and incentives to make it happen.
The spectre of delays also looms large. If the Hinkley Point C nuclear plant, already plagued by missed deadlines, fails to come online by its current 2029-31 estimate, the life of other nuclear plants may need to be extended at considerable expense. A more relaxed 2035 deadline, in contrast, would allow gas-powered stations to bridge any generation gaps at a likely lower cost, albeit with a hit to emissions.
Yet, the accelerated timeline also promises benefits. Faster delivery of transmission hook-ups could mitigate the exasperating “constraint payments” to offshore wind operators when supply outstrips grid capacity. More rapid grid enhancements may lure power-hungry data centers to UK shores sooner. The economic ripples could extend to increased domestic manufacturing of high-voltage cables and other essential components.
Transparency Essential for Public Trust
The trouble is, no one has comprehensively modelled these tradeoffs to clearly communicate the optimal pace from a cost perspective. Neso’s report argues that “pace must be the primary goal” but immediately cautions that “this cannot come at the expense of public consent or excessive cost as that would mean the clean power objective would be self-defeating.” It’s an analytical dodge that fails to illuminate the core tension between urgency and affordability.
With the government poised to respond to the Neso findings in the coming months and Ofgem expected to weigh in, the opportunity to tackle this question head-on must not be squandered. For a programme that will mobilize in excess of £200 billion, the public deserves a transparent accounting of the costs and benefits of racing to a 2030 finish line versus proceeding at a more measured speed to 2035 or somewhere in between.
As Miliband makes the case for the UK to become a “clean energy superpower,” he cannot afford to downplay the centrality of consumer costs in the equation. An honest reckoning of the tradeoffs will be essential to sustaining public buy-in for this monumental undertaking. In the dash to a green energy future, the price of haste must not be obscured.
