UK electricity: too expensive, too carbon heavy and too risk averse?
The Tony Blair Institute issues recommendations for government and the energy sector.
The report on Cheaper Power 2030, Net Zero 2050: Resetting the UK’s Electricity Strategy for the Future recommends a recalibrated energy strategy, focused on cheaper, abundant electricity and notes that changes will be needed as follows:
- Recalibrating the UK’s clean-power plan for least-cost pathways - achieving clean power must remain the objective, but it must be delivered in a way that is cost-effective and commands public support.
- Fixing market design and investment signals - a low-cost electricity system will not come from onerous central planning, but from a well-functioning energy market. This means accelerating the process towards introducing more localised and temporal market signals and considering reforms to the Contracts for Difference system to reduce costs and put risk back into the hands of energy suppliers rather than consumers.
- Implementing radical planning reform - the government must urgently implement even more radical reform to the planning regime than currently envisaged, by centralising decision-making on key projects and further reducing environmental burdens.
- Accelerating technology, data and system innovation -NESO should be upgraded with AI capabilities to improve system operation, while all energy data must be released consistently to support innovation.
- Developing a low-cost generation mix that works for now and the future - the UK needs a generation mix optimised for cost and reliability, not just speed.
- Making gas cheaper - carbon pricing has played its role in the UK electricity system. It successfully removed coal from generation. Today its main effect is to raise bills, since gas sets the wholesale price most of the time. With renewables already cheaper than gas and with coal gone, suspending some of the carbon taxes on gas until 2030 would not undermine decarbonisation but would deliver immediate savings and ensure gas remains available when renewables are scarce. Beyond 2030, carbon pricing can be reintroduced to provide long-term investment signals.
