Helm Talks - energy climate infrastructure & more20 Juni 2023

Net zero crunch time

The net zero electricity targets in the UK are fast-approaching. On current policies, there is little chance that we get there by 2035, let alone Labour’s 2030. UK energy infrastructure is not designed around intermittent wind, intermittent solar, active demand management, around electric car charging, air conditioning and heat pumps and decentralised home generation. A radical system change is required in both the electricity transmission and distribution systems. This is all going to cost a lot more than our leaders would have us believe. The supply chains for the transition are not UK-based, so we are reliant on the critical imports for net zero – the minerals, refined products, batteries, solar panels, wind turbines and much else. We run a very large trade deficit, so foreigners will also have to lend us the money to pay for these imports. We don’t even have enough skilled people – when it comes to smart meters, for example, we are still at 50% coverage only, even though the aim had been to install meters in all households by 2019/20. It is going to take twice as long and twice the cost for even this part of the net zero infrastructure to be completed. How will the required changes be financed? Who will pay the dividends, interest and capital, including the capital maintenance? In a high-interest, high-inflation world, the economics changes significantly. It’s hard to see how all the investment needed will be delivered. Something has to give. Either we have to pay higher taxes, higher energy bills and start switching from consumption to saving, or the net zero targets will inevitably slip back. Time for our leaders to spell out what it would really take to get to net zero.

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