Starmer's Great British Energy Plans Would be a Disaster

This week, as part of Labour’s election pitch, Keir Starmer declared that: “Heating our homes should not mean leaving our front door open to Russia.” According to Labour, the party’s plans for a publicly-owned Great British Energy company will help “close the door to Putin”. The Standard reports that Starmer accused the Government of “gambling with family finances by opposing investment in homegrown clean energy”, and said GB Energy would help protect the country from global energy shocks, such as the natural gas price spike in 2022 attributed to Russia’s invasion of Ukraine. But Labour’s lumping together of the issues of geopolitics and national security, energy security and household finances is too ambitious and has no foundation in reality.

Putin coming through our front doors and no doubt pocketing whatever catches his eye is an emotive image. But Britain has never been dependent on Moscow for heat. Since the turn of the century, natural gas from Russia has amounted to less than 1% of our energy imports. Russian gas did flow to the U.K. in the years 2017 to 2022, peaking at 6.19% in 2021. But this was quickly halted at the outbreak of the war and by far the biggest supplier of gas to the U.K. has long been Norway, at 66.78% of our gas imports. A distant second is Qatar, which has provided 11.91% of our imported gas, and which as far as geopolitics goes ought to be as concerning as imports from Russia, given allegations that the Qatari monarchy has supported Hamas and groups linked to ISIS.

A further problem arises out of the misconception that recent price spikes were caused by Russia’s invasion of Ukraine. But as the following data show, the invasion, which came in the last week of February 2022, immediately preceded a radical fall in gas prices from that month’s spike, before spiking again into the summer of that year. Moreover, prices had been climbing above their historical highs for the entire year previously. The reason, of course, was nothing to do with Russia, but recovery from lockdowns, reckless money printing and years of under-investment caused by ESG and related interventions by shareholder activists, green billionaires and financial institutions and regulators.

That’s a problem for Keir lockdown-sooner-harder-longer Starmer and his desire to champion Net Zero. And not just for the obvious reasons that the price rises were caused by lockdowns and environmentalism.

First, no matter how successful GB Energy will be in decarbonising power generation in the U.K. by building countless new wind and solar farms, those renewables will need to be backed up by gas-fired generators.

Second, by far the majority of homes in the U.K. are heated by gas, not electricity. GB Energy does not mitigate the problem of high energy prices or the risk of Russia ‘weaponising’ energy resources.

By emphasising renewable energy, rather than North Sea oil and gas production, which Labour intends to squeeze by imposing windfall taxes to finance GB Energy, Starmer’s policy agenda will discourage investment. This will reduce domestic production, increase gas prices and make the U.K. more vulnerable to gas market volatility. Far from learning from history, Starmer seems to be bent on repeating it.

“But heat pumps!” complain the green blob chorus. Yet even if Labour was to announce a radical programme of heat pump installations, and was to succeed in ripping out the gas boilers from a million homes a year, it would take a quarter of a century to complete the project. And those homes would still not be protected from gas price volatility because the green generators still need gas backup.

Meanwhile, of course, those homes will be lumbered with the costs of retrofitting. According to the Government’s statistics, the average air source heat pump installation cost £13,332. And despite a £7,500 grant, and despite energy price spikes, just 34,322 homes in England and Wales applied for the free money to help them with the cost between May 2022 and February 2024. Households facing the repayments on those retrofits and higher electricity prices may yet ask themselves whether Putin knocking at their front door would have been preferable to Sir Keir’s intrusion into their homes.

Britain’s indigenous gas production peaked in 2000 at 1.2 million GWh equivalent. By 2023, this fell to 382,726 GWh. Meanwhile, imports increased from 30,464 GWh to 493,887. Britain became a net gas importer in 2010, amid practically no reflection in Westminster about how the green agenda was transforming our industries and economy. Between that peak in production in the early 2000s and the lockdowns, electricity prices tripled.

Most of the energy we use in our homes is used to create heat. Gas is the superior form of energy for this application because it exists in immense quantities, is easy to extract, requires minimal processing, and is easy to store, transport and use. It is thus cheap. Conversely, electricity must be produced, i.e., converted, either from gas, or from kinetic energy such as wind. This makes electricity more expensive than gas. Heat pumps can do a good job, in theory, of increasing the efficiency of electric heating, to make the cost of fuel equivalent to gas heating but only at a huge initial outlay – many times greater than the cost of a gas boiler.

Consequently, in any normal context, it is impossible for renewables to produce power more cheaply than gas. But we do not live in normal times. Green energy policy in the U.K. and Europe has disfavoured oil and gas exploration. And financial institutions have increasingly been used to limit services available to hydrocarbon energy companies. Costs rose, investment fell and scarcity pushed gas prices up, even before lockdowns. And this gave birth to the idea that high electricity prices were caused, not by green policy restricting supply, but by the inherent instability of gas markets.

Policymakers’ and others’ focus on electricity has therefore been a huge and dangerous distraction. Ultimately, the Net Zero agenda requires the ‘electrification of everything’, including heat and transport. But there exists very little evidence of consumer demand for EVs and heat pumps without massive subsidies. And that is because the technology simply does not exist – and may never exist – to meet policy targets without imposing huge costs on consumers and taxpayers. Merely ‘decarbonising’ the grid does not make EVs and heat pumps viable any more than it protects people from foreign tyrants, international market price volatility or the cold.

The myth of our susceptibility to volatile Russian gas prices persists. But Britain has never been dependent on Moscow for heat. Since the turn of the century, natural gas from Russia has amounted to less than 1% of imports. In spite of Starmer’s offering seemingly being an alternative to the last 14 years of Conservative Government, he manages to epitomise the political Establishment’s total divorce from reality. Promises to protect the country’s homes from despotic Norwegian warlords would be scarcely more plausible than his promises to reduce our bills and protect us from Russia, markets and the elements. Wrap up warm, because it’s going to be an increasingly cold five years, and possibly much longer.