Britain’s power grid is turning cheap wind into expensive electricity

The system operator thinks costs might rise to £8 billion per year by 2030.

£8 billion would be towards £100 a year per household, just to turn wind turbines off and expensive gas plants on instead - often these are owned by the same companies.

Many in the energy sector make this out to be inevitable. It isn’t. It’s a symptom of a system that channels value upwards rather than down to the public it should be serving. And it needs fixing.

First off, why is this happening?

The electricity market has a single ‘arena’ in which electricity generators compete to sell their electricity. Generators line up from cheapest to most expensive. The line is cut depending on how much electricity is needed. That way, the cheapest generators are always switched on.

The problem is Britain lines the generators up regardless of where they physically are.

We have built a lot of wind turbines in Scotland. Fair enough, Scotland’s windy. And onshore wind was banned in England for years.

But we didn’t upgrade the power lines to transmit more power southwards to where it’s largely needed: England’s towns and cities.

Why did we build the wind farms before upgrading the wires? Put simply, poor estimates and the wrong incentives. Officials underestimated how long it’d take to build the grid and electricity grid companies profit by underdelivering (they’re rewarded for “efficiency” - or cutting back).

The result is bill payers bizarrely paying wind farms to turn on, turn off again, and then paying an already expensive gas plant elsewhere extra to fire up anyway.

A major grid upgrade is underway to solve this. But the only thing that’s certain about the upgrade plans, which remain undisclosed, is they’re already delayed and over budget.

We in the energy sector are not covering ourselves in glory here. There’s no hiding rising bills from billpayers. Eventually, people’s patience will snap.

What to do? Three steps.

One: do what most developed countries do and actually look at what we’re switching on before we promise to pay. This is called locational pricing. You can do it in several ways. All would cut bills in every part of the country and break the link between gas and electricity prices. Two: open up our grid plans. They’re not working. They’re very expensive. We need transparency and ideas to cut costs and speed things up.

Three: cut electricity taxes. The green levies on bills, ironically, gum up the economics of a greener power grid. They need to go. The prime minister should start a programme of real levy reform and get a proper grip of them.

These three steps aren’t silver bullets. But they are the three most important things this government could do to get a lid on electricity bills, and finally let the value of renewables through to people.

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Jack Pardoe is Head of Policy at Octopus Energy.

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