Why are electricity bills so high in the UK? (It’s not just the weather)

The UK government is reportedly considering abandoning its target to eliminate fossil fuels from the country’s electricity supply by 2030 in a bid to reduce energy bills.

This is unsurprising given that the UK is already one of the most expensive countries in Europe to use electricity, but despite significant investment in relatively cheap renewable energy, this situation is unlikely to change any time soon. In fact, even when wind farms are operating at full capacity, prices remain high.

But pushing to decarbonize the grid (which is necessary for other reasons) and abandoning this goal won’t make energy significantly cheaper. The reason lies in the way electricity markets work and the geography and policies that shape the UK’s energy system.

Firstly, wholesale electricity prices are determined in a way that essentially means that everyone has to pay for the most expensive source of electricity used at the time (mainly gas power stations in the UK).

The gas burnt to power Britain’s lights and kettles will have to be liquefied and shipped from the US or Qatar amid a global bidding war, then returned to its original state. The rise in gas prices causes wholesale prices to rise, which in turn leads to a rise in electricity bills.

Cheaper renewable energy sources (solar, wind, and nuclear power generation costs are very low) have little effect. One reason for this is that while the operating costs of renewable electricity are very low, the installation costs are not.

To encourage companies to build new generation capacity, governments need to offer companies a guaranteed price for the electricity they produce to cover their costs. For wind farms, this includes the cost of purchasing and installing the turbines and electrical equipment, as well as planning the application.

Providing consumers with a variety of power sources also requires expensive infrastructure investments. In the UK, for example, after decades of low investment, we don’t have the grid capacity we need.

Nearly 40% of the electricity produced by Scottish wind farms has been wasted so far this year. This was because the electricity grid was unable to move or store electricity to other parts of the UK.

Overall, the combined cost of imported gas, infrastructure and guaranteed prices to producers will result in higher bills for consumers now and in the future.

Most requests to reduce these bills effectively come down to proposing to shift some of these costs onto taxpayers, effectively moving them from one bill to another. This is what happened in France, where “cheap” nuclear power is the result of huge government spending in the past. The French may not see UK-level energy bills, but they do have higher taxes and public debt.

clouds on the horizon

Despite these challenges, successive UK governments have pledged to continue investing in new technologies, as relying on imported polluting and volatile fossil fuels is considered too risky. As the Guardian has reported, delaying a full transition to renewable energy is effectively a bet that gas prices will fall in the short term, allowing the UK to commission cheaper renewable energy later on.

But cheaper renewable energy has its own problems because it has a different role. Solar and wind power are cheap but intermittent. Nuclear power is the most expensive, but it always works.

All of this creates a difficult situation for UK consumers. New nuclear power plants require very long safety and planning procedures and require modernization of the national power grid. The decision to cancel an ambitious project to obtain solar power from Morocco may be regretted.

But the main factors are simply geography and timing. Thanks in part to its location, the UK has become a world leader in the renewable technology wind power, but globally it appears to play a less important role than solar. And while the cost of solar power is decreasing rapidly, the learning curve for wind power is slow.

And there is no clear way to increase the number of sunny days in the UK. In countries like Spain, where there is an abundance of sun and wind, it is much easier to transition to cheaper renewable energy than in the UK.

So despite complaints about high bills, the UK’s options are limited. Geography gives us the wind, not the sun. Policies have led to world-class renewable energy, but the grid is also struggling to deliver that power.

The future will depend on whether new technologies such as cheaper batteries, tidal power and small modular reactors can fill the gaps left by weather and planning delays.

None of this is easy or cheap. But the alternative – remaining dependent on imported volatile fossil fuels and holding paper money hostage to a global crisis – is even worse.

British consumers face a future in which their electricity bills will remain higher than in many parts of Europe, not just because of policy choices but also because there is a lack of sunshine that brings costs down elsewhere. The only way to close that gap is to bet on emerging technologies.

This article is republished from The Conversation under a Creative Commons license. Read the original article.