Helm Talks - energy climate infrastructure & more

• Locking in permanently high costs for British energy

  British energy policy, once heralded as a pathway to cheap, secure and decarbonised power, has instead resulted in some of the highest energy costs globally. Despite the optimism of Ed Miliband and before him, Boris Johnson, Britain’s energy system is heavily dependent on foreign supply chains, finance and ownership. The shift to intermittent renewables like wind and solar has doubled infrastructure needs, while long-term contracts lock in elevated prices until at least 2045. Offshore wind, particularly in Scotland, suffers from grid constraints, leading to payments for unused generation. The government’s approach to nuclear, with its “let’s try one and see if it works” perspective, rather than a fully fledged nuclear programme, has followed an inefficient and costly path, further entrenching high costs. This trajectory poses serious risks to the UK economy. Energy-intensive industries are closing, and few new ones are emerging, as high energy prices deter investment. Britain’s apparent success in reducing carbon emissions masks a growing reliance on imported carbon-intensive goods. Without radical policy reform – renegotiating contracts, restructuring pricing, and rethinking energy strategy – Britain faces a future of permanently high energy costs and diminished industrial competitiveness. What is needed now is not our politicians flying off to yet another COP, this time in Brazil (with access by a new road cut through the Amazon rainforest), but honesty and humility in global climate discussions, urging leaders to learn from Britain’s missteps rather than emulate them.

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• Why is UK infrastructure so expensive?

  The UK’s infrastructure costs are amongst the highest globally, making ambitious projects—like new nuclear plants, HS2, and airport expansions—extremely expensive. Hinkley and Sizewell nuclear stations together may end up costing more than the original full costs of HS2, and a new Heathrow runway could reach £40 billion. Even basic upgrades, like sewage tanks and reservoirs, are far pricier than elsewhere. While some projects, such as the Elizabeth Line and Thames Tideway, have been delivered efficiently, these are rare exceptions. The main drivers of high costs are higher costs of capital (due to high interest rates and inflation), low labour productivity, and fragmented project delivery. The UK often builds infrastructure as isolated projects rather than as part of coordinated programmes, which prevents investment in supply chains and skills. France’s programme of nuclear power stations building in the 1980s is an example of how things could be done. Unlike countries that use the state’s balance sheet or commit to long-term programmes, the UK’s piecemeal approach keeps costs high, discourages investors, and limits what can actually be delivered. Without smarter regulation and better planning, these high costs will continue to hold back progress.

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• Water: what to do after Cunliffe?

  Few people have much good to say about the water industry, and the blame game is fully engaged. But what to do? There are four possible options: continue with minimal reform; implement the recommendations of the recent Independent Commission on Water, led by Sir Jon Cunliffe; nationalise the industry; or adopt a catchment-based regulatory model. The Cunliffe Commission advocates: abolishing Ofwat, merging its functions with the Environment Agency, and introducing a supervision model akin to banking regulation. The former is not thought through, not least its neglect of the EA. The latter adds even more layers of regulation. It will be costly and there is a serious risk of regulatory capture, all the while not addressing the core issues of public distrust and investor reluctance. The right approach is Catchment Regulation Model, using digital mapping and AI-enhanced data to guide environmental interventions. It encourages participation by all the parties, including through competitive bidding for projects (as opposed to financial engineering). It is the one route that can create a sustainable, transparent, and inclusive framework for the next 35 years. However, as the government reflects on the recommendations in the final Cunliffe Commission report, continued superficial reforms, particularly in the case of Thames Water, sadly look more likely, kicking the problems down the road.

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• Why electricity prices are so high and why renewables are not cheap

  Why when solar and wind are supposed to be nine times cheaper than gas are electricity prices in the UK amongst the highest in the world? Why when the UK is supposed to be a fast track to this promised cheap net zero electricity by 2030 are large industrial users struggling? Why is Grangemouth in trouble? Why is the steel industry in such bad shape that it has be bailed out and nationalised? Why have fertiliser and petrochemical companies and now biofuels all reached for the exit? The UK’s dash for renewables is supposed to be creating a clean-energy superpower, based upon “home-grown” energy, whereas in fact almost all of the supply chain is imported. Renewables are not cheap when their system costs are properly measured. Marginal costs might be near zero, but a renewables-based system already needs almost twice the capacity as the old coal plus gas plus nuclear system, even though demand has fallen. To produce roughly the same amount of firm power, a renewables-based system already requires lots of new transmission lines, which were not needed in the past for the same demand, as well as a host of upgrades. It requires batteries and storage and lots of back-up gas standing mostly idle, as well relying heavily on imported electricity via the interconnectors to keep the lights on. Renewables are not like-for-like and the wholesale price for firm power should not be compared with the contract for differences (CfD) price for intermittent generation. The nine times cheaper claim relies on leaving almost all the relevant costs out of the comparison. It's time for some energy and climate realism and some honesty about the costs and consequences of the net zero 2030 target.

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• The changing net zero zeitgeist

  In the mid-2030s, historians may look back and note that, despite numerous COP meetings and agreements like the Paris Agreement, global carbon emissions continued to rise, with significant contributions from countries like India, China, and Indonesia. The world failed to meet the 1.5°C target, making 2°C and even 3°C more likely. In this podcast, Dieter Helm looks at why the COP process has not delivered the desired outcomes, and the immediate imperative to shift strategies to tackle climate change from territorial net zero targets in the UK to more realistic approaches to reducing global emissions. Renewable energy sources like wind and solar, despite their growth, still contribute a small fraction to global energy supplies compared to fossil fuels. The increasing demand for electricity – in particular, from new technologies and data centres – and the intermittent nature of renewables have led to higher system costs, with nuclear power emerging (once again), but this time as a more viable option for stable and continuous energy supply. Looking ahead, more radical measures, including geoengineering, might be necessary to address climate change effectively. Whatever strategy is adopted, the net zero path being pursued in the UK is unlikely to be successful, as our historians in 2035 will no doubt have discovered.

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