Who is telling the truth when it comes to Net Zero?
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NATIONALLY and locally, Reform Party politicians have called Net Zero a ‘waste of money’. In part this is because they affect not to believe the climate science. Let’s just say that the climate science profession is probably a more credible authority on this matter than a party that receives 40% of its funding from the fossil fuel industries and their allies.
The other side of Reform’s argument is the claim that net zero is ‘too expensive’ – and not only for their fossil fuel paymasters, whose assets will be wiped out, but for the ordinary public. Against this, the Labour government claims that bills are high due to fossil fuels, and the only way to reduce them is by accelerating the transition to green energy. Who is telling the truth?
Labour’s position might seem dubious: renewables now provide around 50% of our electricity, but bills don’t seem to be getting cheaper. Nevertheless, their central contention is correct. First, it is cheaper to produce electricity from renewables: around £40 per MWh from solar – or £90 if you add on the costs of batteries, connection and grid-balancing, etc – compared to around £130 for gas. Notwithstanding some rather questionable projections we’ve been sent – which perhaps we can discuss another time – renewables are likely to continue to get cheaper. Thus the Climate Change Committee now thinks we can reach Net Zero for the cost of just 0.2% of our GDP per year.
Second, our bills are high because of gas. We all know that the impact of the Ukraine war on international gas prices has been one of the key drivers of the rise, and according to analysts at Carbon Brief, gas price rises are responsible for 54% of the rise in our bills, with green policy levies responsible for only 6%. Increasing network costs account for 20% of the rise. Part of this rise is, ironically, also due to rising gas prices: some of the policy costs track inflation, and network costs include the cost of bailing out ruined gas generators.
So why aren’t our bills falling? The answer has to do with the system of ‘marginal pricing’ in the UK electricity market. In this system, all power generators are paid the same price for their electricity, which is the price of the ‘marginal unit’ – the final, most expensive generator that has to be turned on to meet expected demand. In other words, the most expensive source of electricity sets the price for all electricity. In the UK, for 98% of the time, this comes from gas. Other countries which are less exposed to gas prices have seen less steep increases in energy prices.
Source: Stratford Herald
