Helm Talks - energy climate infrastructure & more

There is no such thing as a free lunch, and there is no such thing as “free” electricity. What is true is that there are going to be days in summer when supply exceeds demands and hence the value of electricity generated will be zero. Surpluses arise because a renewables-based system needs far more total generating capacity to guarantee supply at all times, including when the sun is not shining and the wind is not blowing. Using the UK as an example, meeting a peak demand of around 45GW may require roughly double the capacity compared with the “bad old days” of fossil-fuel-based generation, as well as twice the grid system and lots of batteries and storage. There are bound to be times when lots of that 120GW is generating but demand is low. But excess electricity does not reduce the costs. These don’t magically go away. Investors will build wind, solar and nuclear plants only if they are paid through mechanisms such as fixed-price contracts, and households also need to fund the expanded grid, balancing and storage required to handle the extra capacity. As a result, “free” electricity during certain periods will still be paid for elsewhere – ultimately by consumers and taxpayers. Renewables are a good thing, but they need to be accompanied by an honest public discussion about the real system costs of decarbonisation rather than the promise of free energy.

Another day and another bit of sticky plaster is applied. With the highest industrial energy prices in the developed world, the government is increasing the number of companies that will get a bit off their bills in 2027. This follows other moves, like the £150 off customer bills. It will not be enough, given the sheer scale of the problems. The industrial crisis will go on; domestic bills are scheduled to go up and stay up for the next decade; new energy-intensive inward investment (e.g. for data centres) is being deterred; and where there are projects, own generation from gas is the route to firm power. The facts are not changing, and it is getting ever more painful to ignore them. Climate realism means facing up to the relentless increase in the concentration of carbon in the atmosphere, the continuing 85% of the world’s energy supplies coming from fossil fuels, and the lack of any transition away from this, with the oil, gas and coal burn going ever up as the world energy demand looks set to double by 2050. Renewables on a system basis are not cheap. It takes 120GW now to meet the same peak 45GW demand, which 60GW once comfortably met, as well as doubling the transmission grid and adding all the extra batteries and storage. The renewables are not “home-grown” – the supply chains are foreign.  Britain is not on a path to home-grown energy. It is not cheap, and other countries are not looking to Britain as a “clean-energy superpower”. They look to Britain to find out how not to do it – no one else wants the highest energy prices. It’s not difficult to sort all this out, but more sticky plasters will make the situation worse and harder to fix the longer the government ducks the need for a fundamental re-set of British energy policy.

The news is very much about gas price shocks, but this is to misunderstand the fundamental difference between temporary shocks and long-term trends. Gas prices spike when major geopolitical events occur (e.g. Russia’s invasion of Ukraine or the blocking of the Strait of Hormuz), but then often fall sharply afterwards. Such fluctuations are nothing new and should be expected, but they don’t prove that gas is inherently unstable or that the UK can simply “get out of gas” by relying more on wind, solar, and some nuclear. Despite two decades of expanding renewables, the UK still depends on gas for about 35% of its energy, with heating and industry making full exit impossible anytime soon. At the same time, the UK is not making good use of its own North Sea gas. Current policy effectively discourages domestic production through limited licences and heavy windfall taxes, while simultaneously encouraging imports, even though imported LNG is more polluting and exposes the UK to foreign supply risks. The claim being made that domestic gas always has to follow world prices is misleading – long-term contracts once gave the UK stable, predictable gas supplies, and could do so again, if the government required such contracts as a licensing condition. Moreover, the UK’s energy system is more exposed to global gas prices than other countries because electricity prices feed gas costs straight through, industrial electricity prices are the highest in the developed world, and the UK has very little gas storage. A more balanced, practical approach is essential to manage the gas we will inevitably continue to use, to prioritise domestic production over polluting imports, and to build proper storage and contract structures that improve security, environmental outcomes, and industrial competitiveness.

Britain is facing a deep industrial energy price crisis, with many major industries collapsing or shrinking because UK electricity costs are among the highest in the world. Recent closures—from refineries to steel, fertilizer, and fibreglass plants—show how uncompetitive energy prices have already pushed firms out, long before the latest geopolitical price spikes made things worse. The core issue isn’t temporary shocks but a long‑term cost problem baked into the UK’s electricity system costs. To restore industrial competitiveness, Britain needs permanent, structural reform to electricity pricing—not short-term fixes. This requires three big changes: charge industry based on long‑run marginal system costs rather than loading full network costs onto them; reform the electricity market by moving away from gas‑set wholesale prices towards a capacity‑based “equivalent firm power” system that properly accounts for intermittency; and index carbon prices inversely to oil and gas prices to stabilise overall energy costs. Together with improvements in gas storage and long‑term gas supply contracts from the North Sea, these reforms would deliver predictable, globally competitive energy prices to support both existing industries and the more electricity‑intensive sectors of the future.

The International Energy Agency, at its recent ministerial meeting (Feb 18th/19th), agreed on one top priority: energy security. Hybrid warfare, cyber-attacks and the ease with which modern energy infrastructure can be disrupted underscore the urgency of the issue. The UK’s current approach – reducing domestic gas production, increasing reliance on imported LNG (liquefied natural gas), depending heavily on undersea cables, and an overwhelming emphasis on intermittent technologies – is making the country more vulnerable, not less. Two key factors are weakening the UK’s industrial resilience and national defence capability: its strategic dependencies, particularly on Chinese supply chains for renewable technologies; and the rising costs and intermittency of its energy mix. Despite the scale of this challenge, there are significant opportunities to rebuild a more secure, resilient energy system. UK energy is neither "home-grown" nor cheaper. High-cost energy, dependent on foreign supply chains, raises the cost of defence and the exposure to shocks, political or otherwise.

Several key industries have fallen back to production levels last seen in the 1950s. Car production has dropped to its 1952 level at around 700,000 vehicles a year—down by nearly 1 million in a decade—while steel is a shadow of its former output. Even cement is falling back, being increasingly switched to imports. Housebuilding is far below its 1950s’ and 1960s’ levels. The fertiliser industry has closed. Net zero technology is overwhelmingly imported (e.g. the batteries, solar panels, wind turbines, critical minerals and now EVs ), now mostly from China. Why? Deindustrialisation has multiple causes, exacerbated by the highest industrial electricity prices in the developed world. New digital technologies and data centres are highly energy‑intensive and need reliable, non-intermittent, round‑the‑clock electricity. The idea that we can simply become Singapore-on-Thames, relying on finance, law, tech, and hospitality, is at best naive. Traditional service sectors face rising costs from recent tax and wage policies, and global finance is becoming more fragmented and less open. Meanwhile, the UK continues to rely heavily on foreign investors to fund essential infrastructure, from water and energy to roads. The UK needs to focus on three big areas: competitive business taxes; affordable and globally competitive energy prices; and major investment in skills. Raising employers' national insurance, raising the minimum wage, increasing workers’ rights and signing ever-higher contracts for offshore wind leave what is left of UK industry reaching for the exit. Instead, we need a switch from business costs and taxes to consumers. It isn’t sustainable for voters to enjoy 21st‑century living standards with 1950s’ outputs. It will take a brave politician to tell the public some of these basic facts of life.

Many people in the Labour Party support bringing utilities like water (in particular, Thames Water) and electricity transmission back into public ownership. Supporters often present nationalisation as a simple fix: no greedy investors, no dividends, and lower bills. But, in reality, nationalisation is far more complicated and involves real trade-offs that are often glossed over. Financial risks of running these industries do not disappear when the state takes over. Under private ownership, investors bear the risk and expect returns through dividends and interest. Under nationalisation, that risk shifts to customers and taxpayers instead. If the government still borrows to fund investment, interest payments remain. If it wants to avoid borrowing, then customers would have to pay higher bills now to fund upgrades and maintenance — a return to the “pay-as-you-go” model used after the Second World War. Nationalisation also wouldn’t automatically improve how these industries are run. The state once had strong expertise in managing utilities, but that capacity largely no longer exists. There is a risk that governments use nationalised industries for political goals, such as freezing prices, which can lead to underinvestment and reduce service quality. Anyone arguing for nationalisation needs to be honest that it likely means higher bills today, real financial risk for the public, and no guarantee of better performance.

As 2026 begins, and people look ahead to what it might bring, this podcast focuses on the likely, more profound, economic and geopolitical shifts expected by 2030 – now less than five years’ away. Immediate questions revolve around UK elections, leadership changes, and ongoing conflicts like Ukraine and Taiwan, but infrastructure, technology and economic planning require a longer-term perspective. By 2030, the world is likely to be more fragmented into economic and political blocs, with China, Russia, and the US reinforcing self-sufficiency, and emerging economies like India and Indonesia gaining prominence. Climate change progress is expected to remain minimal, and technological revolutions in AI and quantum computing may either transform industries or deliver incremental changes. Of the possible shifts in the next five years, a significant global financial correction before 2030 appears the most likely, driven by unsustainable market valuations, private equity vulnerabilities, and mounting government debt. The aftermath could involve serious inflation and currency debasement, as governments resort to aggressive monetary interventions. This scenario would reshape political and economic models, potentially leading to more state intervention and less private sector influence. Looking ahead, three possible trajectories for the UK and similar economies are outlined: continued muddling through with incremental adjustments; a radical re-set akin to a “Thatcher moment” to curb public spending and debt; or a protectionist “fortress Britain” approach emphasising self-sufficiency. Each path carries profound implications for trade, growth, and political stability. But financial markets seem most likely to act as the catalyst for systemic change before 2030.

Why is it that this government, and its predecessors, find economic growth so hard to attain? In the UK, growth remains stubbornly low for a number of reasons, and these are not the ones that the government is currently blaming. First, governments avoid hard choices and spread resources too thinly. As Tony Blair said to me many years ago, politicians prefer to have "and" over "or" – in his case, nuclear and renewables. Political instinct favours doing “everything” to please all parts of politicians’ constituencies, but this dilutes investment and prevents large-scale, coordinated programmes. Instead of comprehensive strategies like those seen in China or France, the UK pursues piecemeal, case-by-case projects, resulting in high costs and inefficiencies, such as probably the most expensive nuclear plants in the world (at c. £12 billion per gigawatt). Without focused, long-term infrastructure programmes, growth cannot accelerate. Beyond this, structural issues compound the problem. Western economies, especially the UK, prioritise consumption over production, rely heavily on welfare spending, and maintain incentive systems that discourage work. High taxes and borrowing further stifle growth, while domestic savings – critical for funding investment – are minimal. Unlike post-war economic miracles in Germany, Japan and China, driven by savings and production, the UK depends on foreign capital and supply chains, leaving its economy vulnerable. A fundamental shift towards production, supported by domestic savings and programme-driven investment, is a prerequisite for sustainable growth.

There are five major lessons from COP30. They are not the ones the climate community has highlighted, but they really matter and will shape the post-COP30 climate change negotiations. First up is the realisation that it is no longer a European (and UK) game. The shifts in world political and economic power for the first time sidelined the Europeans. There was no UK “climate change leadership” to be taken seriously. It is India, China, Russia and the US that pulled the strings, whether present or not. Second, no major oil and gas producer or coal-burning nation wants to stop. Brazil set the tone: it announced that it wants to be the world’s fourth-largest oil producer, with drilling to start in the mouth of the Amazon. Third, no one wants to cut their carbon consumption, personally or nationally. The Brazilian carbon footprint includes the flights, the new road through the rainforest, the cruise liners for accommodation, as well as the commitment to its own fossil fuels. Fourth, the real action was on the bottom-up trade issues, notably the carbon border adjustment mechanism (CBAM) and the emerging coalition of the willing with the extension of carbon pricing. The fifth lesson is that the temperature is going to go on rising: 30 COPs so far haven’t made a dent in the carbon concentration in the atmosphere, and another 30 COPs probably won’t.