WEBVTT - The Real Reason UK Energy Prices Are Skyrocketing 0:00:02.720 --> 0:00:16.320 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:17.840 --> 0:00:20.200 Welcome to Merrin Talks Money, the podcast at which people 0:00:20.239 --> 0:00:23.240 who know the markets explain the markets. I'm merin Thumbstweb. 0:00:23.520 --> 0:00:26.440 This week we are discussing Britain's energy policies, how important 0:00:26.440 --> 0:00:29.760 they are to our productivity and to British industry. With me, 0:00:29.880 --> 0:00:32.520 is said Dita Helm, Professor of Economic Policy and Fellow 0:00:32.520 --> 0:00:35.240 and Economics at New College, Oxford. Helme is best known 0:00:35.240 --> 0:00:38.080 for his work on sustainability and the economics of energy. 0:00:38.200 --> 0:00:41.400 He's a best selling author. He's an influential public policy 0:00:41.400 --> 0:00:44.640 advisor and was awarded as knighthood in twenty twenty one 0:00:44.680 --> 0:00:48.400 for his contributions to the environment and to energy policy. 0:00:48.560 --> 0:00:50.880 Professor Helm, Welcome to Merin Talks Money. 0:00:51.440 --> 0:00:52.800 Thank you very much for inviting me. 0:00:53.400 --> 0:00:59.320 Well, I'm we're looking forward to it. There's a lot 0:00:59.440 --> 0:01:01.720 of stuff going on in UK energy. There's a lot 0:01:01.720 --> 0:01:04.880 of stories, everyone's taking side, everyone has an explanation, and 0:01:04.920 --> 0:01:08.240 a lot of stuff doesn't quite make sense. So can 0:01:08.280 --> 0:01:11.560 we start just with answering the very simple question I 0:01:11.600 --> 0:01:14.919 suspect has a complicated answer, but the very simple question 0:01:15.520 --> 0:01:20.760 why is energy electricity in the UK so much more 0:01:20.800 --> 0:01:22.240 expensive than everywhere else. 0:01:22.720 --> 0:01:26.600 Well, the UK has the unenviable position of having about 0:01:26.959 --> 0:01:31.560 expensive electricity in the developed world, and that takes quite 0:01:31.600 --> 0:01:34.440 a lot of doing. Okay, so how do you get 0:01:34.480 --> 0:01:37.640 from being in the mainstream of energy to being at 0:01:37.640 --> 0:01:42.000 this limit. Well, what we've done is decide to go 0:01:42.400 --> 0:01:47.560 unilaterally fast track for net zero on the grounds that 0:01:47.640 --> 0:01:52.840 if we reduce our territorial emissions this will necessarily reduce 0:01:53.240 --> 0:01:54.280 global warming. 0:01:54.720 --> 0:01:57.080 Let's stop right there, because this is something that I 0:01:57.160 --> 0:01:58.720 also want to just be clear on. 0:01:58.840 --> 0:02:00.480 We get a lot of guy from. 0:02:00.320 --> 0:02:03.960 Our politicians about the importance of reducing our carbon emissions, etc. 0:02:04.520 --> 0:02:09.240 And they focus entirely on carbon emissions within the UK, 0:02:09.360 --> 0:02:11.600 and there's no discussion about the fact that if we 0:02:11.600 --> 0:02:14.560 don't produce something here but we buy it off it's 0:02:14.560 --> 0:02:15.960 being produced somewhere else. 0:02:16.160 --> 0:02:17.480 It makes no difference whatsoever. 0:02:18.160 --> 0:02:20.360 And that seems to be one of the core contradictions 0:02:20.360 --> 0:02:22.920 at the heart of the UK net zero policy. 0:02:23.400 --> 0:02:29.079 I think the framework for measuring emissions for the global targets, 0:02:29.160 --> 0:02:32.200 which to be fair to the British governments, comes from 0:02:32.240 --> 0:02:35.800 the UN and through the process, and measuring in terms 0:02:35.840 --> 0:02:40.680 of carbon territorial emissions makes some pretty fundamental mistakes. The 0:02:40.720 --> 0:02:43.720 first is, and it's really important, it doesn't matter in 0:02:43.760 --> 0:02:46.960 the world where a ton of carbon is emitted to 0:02:47.080 --> 0:02:51.200 its impact on climate change. Carbon's just carbon. Similarly, it 0:02:51.200 --> 0:02:55.040 doesn't matter where it's secustrated. Now, climate change is about 0:02:55.080 --> 0:02:58.520 the concentration of carbon in the atmosphere. That's how many 0:02:58.600 --> 0:03:01.040 parts per million of carbon there is up there, and 0:03:01.080 --> 0:03:03.639 that's been going up at two parts per million every 0:03:03.680 --> 0:03:06.000 single year since nineteen ninety without a blip. We haven't 0:03:06.000 --> 0:03:09.960 made any progress on this, and last year as three. Now, 0:03:10.360 --> 0:03:14.680 if you just focus on your territorial carbon emissions, how 0:03:14.720 --> 0:03:18.400 much emissions take place in the UK, that is only 0:03:18.480 --> 0:03:22.040 tangentially related to how much carbon we actually consume. 0:03:22.680 --> 0:03:25.320 So just as a starting point, we should say that 0:03:25.400 --> 0:03:29.079 this whole idea of reducing carbon emissions in the UK 0:03:29.200 --> 0:03:31.760 purely on a territorial basis is meaningless. Guff. 0:03:32.480 --> 0:03:35.640 No, it's not meaningless. It's part of what you would 0:03:35.680 --> 0:03:39.600 do if you unilaterally wanted to stop causing climate change. 0:03:39.880 --> 0:03:44.400 It's potentially necessary, but it's certainly not sufficient. 0:03:44.840 --> 0:03:47.720 Okay, the measurement is meaningless, Guff. When it comes to 0:03:47.800 --> 0:03:51.840 talking about a carbon footprint unless you include the footprint 0:03:51.840 --> 0:03:54.600 of absolutely everything that we import. 0:03:55.760 --> 0:03:58.080 Now, yeah, let's get's right. A lot of stuff we 0:03:58.160 --> 0:04:02.680 produce in Britain, we consume it Britain. Now it does matter, okay, 0:04:03.120 --> 0:04:07.880 but we are very, very prone to import, particularly manufacturing 0:04:08.000 --> 0:04:12.400 energy intensive stuff from elsewhere. And that's where it's our 0:04:12.520 --> 0:04:16.479 carbon consumption that counts, and where it happens to be 0:04:16.520 --> 0:04:19.280 produced is beside the point. And it just so happens 0:04:19.720 --> 0:04:22.440 that this is a country which is de industrialized since 0:04:22.480 --> 0:04:25.880 the early eighties at a faster rate than virtually everybody else. 0:04:26.320 --> 0:04:29.200 And that means that carbon consumption is more important because 0:04:29.200 --> 0:04:31.839 we switched to imports from places like China than it 0:04:31.880 --> 0:04:33.800 would be in a number of other countries. 0:04:34.200 --> 0:04:36.680 Yeah, okay, so let's put that bit to one side. Then, 0:04:36.839 --> 0:04:39.560 with this drive for net zero exists, we don't necessarily 0:04:39.600 --> 0:04:43.560 approve of the parameters around it, but nonetheless this drive exists. 0:04:44.120 --> 0:04:46.400 And that you were about to start telling me before 0:04:46.400 --> 0:04:48.719 I interrupted you, which I'm prone to doing, and I apologize. 0:04:48.760 --> 0:04:51.159 You're about to start telling me how that impacts on 0:04:51.279 --> 0:04:52.680 the cost of energy in the UK. 0:04:53.200 --> 0:04:58.120 Well, if you want to decarbonize your electricity by two 0:04:58.160 --> 0:05:00.839 point thirty, which is the ambition of this government and 0:05:00.880 --> 0:05:03.520 this Secretary of State. I think the Conservatives wanted to 0:05:03.520 --> 0:05:06.200 do it by about two thirty five. You have to 0:05:06.320 --> 0:05:12.880 fast track swapping from fossil fuel generation to wind solar. 0:05:13.279 --> 0:05:15.719 You can't fast track the nuclear and the thing about 0:05:15.760 --> 0:05:19.680 wind and so they have lots of advantages, but basically 0:05:20.120 --> 0:05:26.640 they are low density, geographically dispersed, small units and critically 0:05:26.920 --> 0:05:31.120 inter emittant. So when the wind doesn't blow and the 0:05:31.160 --> 0:05:34.400 sun doesn't shine, you need something else. And of course 0:05:34.480 --> 0:05:38.240 this stuff is not next to the transmission system. So 0:05:38.480 --> 0:05:40.840 instead of the transmission system that used to meet our 0:05:40.920 --> 0:05:43.440 sixty cot at what's you now need all these new 0:05:43.480 --> 0:05:47.719 transmission lines to places like the north coast of Scotland. 0:05:47.920 --> 0:05:49.960 And this all comes at a price. 0:05:50.520 --> 0:05:52.120 So the first thing you said is that we need 0:05:52.160 --> 0:05:55.159 about double the capacity that we used to and I 0:05:55.279 --> 0:05:57.600 just wanted to clarify that is because when the sun 0:05:57.720 --> 0:06:00.799 isn't shining and the wind isn't blowing, bit isn't working, 0:06:00.839 --> 0:06:02.840 but you still need the same capacity you used to, 0:06:03.160 --> 0:06:05.440 so the backup system needs to run at the same time, 0:06:05.520 --> 0:06:07.440 so that's where you get the double from. 0:06:07.960 --> 0:06:08.720 And then with the. 0:06:08.680 --> 0:06:12.839 Transmission we used to have, you know, coulfied stations and 0:06:12.960 --> 0:06:16.360 nuclear stations relatively near to where the energy was needed, 0:06:16.400 --> 0:06:18.760 and a small number of them, so the grid could 0:06:18.800 --> 0:06:22.400 be much smaller. Right, and now we have many, many, 0:06:22.440 --> 0:06:25.960 many different areas sending in energy, some of them very 0:06:25.960 --> 0:06:28.480 far away, so the grid has to be a completely 0:06:28.480 --> 0:06:31.239 different grid to cope with that. And those the two things. 0:06:31.640 --> 0:06:35.640 Just to be clear, The government's advisory planning frame of 0:06:35.680 --> 0:06:38.680 this says that in two thirty if we're to be 0:06:38.760 --> 0:06:42.760 netze and electricity, we will also need thirty five gigawatts 0:06:42.760 --> 0:06:45.880 of gas, which will sit there and only run five 0:06:45.920 --> 0:06:49.480 percent of the time. So that's half your total number 0:06:49.480 --> 0:06:53.360 you had before still has to be there. And if 0:06:53.400 --> 0:06:55.720 you will try to run a gas power station where 0:06:55.720 --> 0:06:57.960 it's idle most of the time and just works five 0:06:57.960 --> 0:07:01.039 percent of the time at short notice, you've really got 0:07:01.080 --> 0:07:01.960 a lot of costs. 0:07:02.440 --> 0:07:02.719 Now. 0:07:03.279 --> 0:07:07.120 In addition to that, we need about ten gigawatts of 0:07:08.240 --> 0:07:10.840 interconnectors so we can import the stuff from Europe if 0:07:10.880 --> 0:07:14.160 we're short in one of those winter periods and we want, 0:07:14.520 --> 0:07:18.360 we will need ten gigawatts of people voluntarily turning themselves 0:07:18.360 --> 0:07:21.960 off what's called active demand management, what I call voluntary 0:07:22.000 --> 0:07:24.840 power cuts. So you need all of that lot to 0:07:24.880 --> 0:07:28.320 get sort of the same amount of electricity you had before, 0:07:28.600 --> 0:07:31.640 because what we want is not intermittent power. We want 0:07:31.720 --> 0:07:34.440 firm power and you know in the new industry for 0:07:34.520 --> 0:07:36.600 things like data centers and banks and sell and you 0:07:36.600 --> 0:07:39.200 don't want the possibility things may turn off. So that's 0:07:39.240 --> 0:07:41.520 why you got that huge capacity. 0:07:41.200 --> 0:07:43.080 Come So one of the things that we keep being 0:07:43.120 --> 0:07:46.560 told is that, you know, solar energy, wind energy, all 0:07:46.640 --> 0:07:48.800 renewables are going to make our energy bills come down. 0:07:48.840 --> 0:07:50.520 But when we talk about that, we're not taking into 0:07:50.520 --> 0:07:53.960 account all the costs that surround using renewable to it's 0:07:54.000 --> 0:07:55.760 simply not true. Your bill is not going to come 0:07:55.800 --> 0:07:57.880 down by three hundred pounds as a result of the 0:07:58.000 --> 0:08:00.680 UK being a you know, greened global power. 0:08:01.520 --> 0:08:08.760 Well, there is one reason why electricity bills could come down. Yes, 0:08:08.800 --> 0:08:12.440 it requires mister Milliband to be exactly wrong. So he 0:08:12.560 --> 0:08:14.760 thinks we're gonna have cheaper bills because we're going to 0:08:14.800 --> 0:08:18.360 get out of high and volatile gas prices. But actually 0:08:18.360 --> 0:08:20.560 the reality is, in real terms of the gas price, 0:08:20.920 --> 0:08:23.240 the European gas price is below the five and ten 0:08:23.320 --> 0:08:26.080 year average, and there's lots of reasons for thinking why 0:08:26.120 --> 0:08:33.319 the gas price might fall. Ironically, though, since our contracting structure, 0:08:33.440 --> 0:08:36.280 what's being done on net zero means that the wholesale 0:08:36.360 --> 0:08:39.520 price is less and less important going forward. He is 0:08:39.559 --> 0:08:43.280 actually making sure in two ways that should the gas 0:08:43.320 --> 0:08:47.480 price fall, we will not get the benefits of that happening. 0:08:47.800 --> 0:08:51.640 Of course, gas in heating, that's a different story. But 0:08:51.720 --> 0:08:54.600 that's all about whether, in fact there is much chance 0:08:54.640 --> 0:08:56.679 that we're all going to switch to heat pumps and 0:08:56.720 --> 0:08:59.960 get out of natural gas spoilers and heating. I suppose. 0:09:00.120 --> 0:09:02.360 I mean, I take your point that it's entirely possible 0:09:02.360 --> 0:09:05.480 that the gas price might fall. But with the demand 0:09:05.480 --> 0:09:08.319 for electricity rising as fast as it is globally, with 0:09:08.559 --> 0:09:11.720 the incredible demand from the big data centers, et cetera, 0:09:11.800 --> 0:09:15.679 it's quite hard falling over the medium term, isn't it. 0:09:16.040 --> 0:09:17.360 And that's it's got to pick up. 0:09:17.400 --> 0:09:20.080 It's got to pick up the marginal the marginal capacity 0:09:20.200 --> 0:09:21.920 required for all these data centers. 0:09:22.320 --> 0:09:25.280 You're absolutely right that the demand for electricity is going 0:09:25.280 --> 0:09:27.840 to go up. Okay, but you have to look what's 0:09:27.880 --> 0:09:30.480 actually happening in the fossil fuel world. So fossil fuels 0:09:30.520 --> 0:09:33.800 provide a four percent of the world's energy. But if 0:09:33.800 --> 0:09:36.240 you look what's happening in the gas world, for example, 0:09:36.360 --> 0:09:39.920 take a look at the power of Siberia to pipeline 0:09:39.920 --> 0:09:42.560 which put In and the Chinese leader are putting together. 0:09:42.920 --> 0:09:47.680 That takes out the marginal LNG demand in Southeast Asia. 0:09:48.160 --> 0:09:53.600 That affects back on the American ellerg. America wasn't exporting 0:09:53.720 --> 0:09:56.280 gas ten years ago. It was going to be. It 0:09:56.320 --> 0:09:58.520 was going to be the mass importer for which the 0:09:58.600 --> 0:10:02.280 Kuwaiti gas was developed to serve the American market. It's 0:10:02.320 --> 0:10:04.360 now one of the biggest exporters in the world, and 0:10:04.360 --> 0:10:06.719 by the way, it's also the largest AWE producer in 0:10:06.800 --> 0:10:09.400 the world. So I don't think it's right to say 0:10:09.800 --> 0:10:12.640 that the gas price is in ever to be going 0:10:12.679 --> 0:10:14.400 to stay where it is or go up. And then remember, 0:10:14.400 --> 0:10:17.160 in Europe the gas price is below it's five and 0:10:17.280 --> 0:10:20.679 ten year level on the Dutch market, which is the 0:10:20.679 --> 0:10:23.280 price that we all use. And that's in a world 0:10:23.280 --> 0:10:24.920 in which we squeezed out a hell of a lot 0:10:24.920 --> 0:10:28.640 of Russian gas. Now it's not implausible to imagine the 0:10:28.679 --> 0:10:30.800 little bit of that Russian gas will creep back in 0:10:30.880 --> 0:10:34.280 as well. So I'm on a different wicket. I think 0:10:34.320 --> 0:10:38.280 that the pressures in the international gas market are largely down. 0:10:38.600 --> 0:10:40.960 But that's why I think that the politicians are completely 0:10:41.000 --> 0:10:43.040 wrong to tell us that they're going to get out 0:10:43.080 --> 0:10:46.600 of high and volatile gas prices. And just because there 0:10:46.640 --> 0:10:49.959 is a spot shock, as there's been in all markets 0:10:50.000 --> 0:10:56.000 in the past, to mistake a trend for a spot shark, 0:10:56.320 --> 0:11:00.000 that I think is just a gross mistake that many 0:11:00.040 --> 0:11:01.800 any politicians in the past have made. 0:11:03.160 --> 0:11:05.240 Okay, I want to ask you about storage in a 0:11:05.280 --> 0:11:07.600 minute and see if that is genuinely a long term 0:11:07.640 --> 0:11:10.680 solution to some of these problems. But before that, you've 0:11:10.679 --> 0:11:13.360 explained everything very clearly. I think everyone listening to the 0:11:13.400 --> 0:11:15.360 part will then go, yep, now I understand how all 0:11:15.400 --> 0:11:18.040 this works. But if you understand it, I understand it. 0:11:18.080 --> 0:11:21.600 Our audience now understand it. Why does Ed Milliband not 0:11:21.760 --> 0:11:26.280 understand it? Why does he persist with this view that 0:11:26.360 --> 0:11:30.280 net zero in the form that it stands is the 0:11:30.360 --> 0:11:33.320 answer to everything, and why does he persist in telling 0:11:33.400 --> 0:11:35.000 us that our energy bills are going to come down 0:11:35.040 --> 0:11:35.640 as a result. 0:11:37.080 --> 0:11:41.000 Well, I'm an economist and I said in the university, 0:11:41.400 --> 0:11:44.599 and he's a politician who has to get elected. I 0:11:44.679 --> 0:11:47.800 had no idea, whether he believes deeply that all of 0:11:47.840 --> 0:11:50.480 this is achievable and we can get to net zero 0:11:50.559 --> 0:11:54.000 by two thirty and it's all going to be cheaper. However, 0:11:54.800 --> 0:11:57.520 it is true that he persuaded a great deal of 0:11:57.520 --> 0:12:00.360 the public that this was the case, and where I 0:12:00.400 --> 0:12:03.320 did a great deal of other people that this was 0:12:03.320 --> 0:12:05.720 a growth strategy. This is one of the areas where 0:12:05.760 --> 0:12:09.679 economic growth was going to come from. Now, in political terms, 0:12:10.360 --> 0:12:14.440 I respect all politicians who have taken the trouble to 0:12:15.040 --> 0:12:19.400 understand that climate change is a really big problem, just 0:12:19.440 --> 0:12:22.480 as I respect politicians from all sorts of parties who 0:12:22.559 --> 0:12:26.360 understand just how much devastation we're doing to biodiversity. So 0:12:26.720 --> 0:12:28.960 that's the first kind of tick in the box, and 0:12:29.040 --> 0:12:33.480 it's common ground, okay. The second is that there's a 0:12:33.559 --> 0:12:39.120 great difference of opinion about whether the technologies that we 0:12:39.200 --> 0:12:42.400 have at the moment can do on a fast track 0:12:42.920 --> 0:12:46.840 what is necessary to decarbonize them. Supposing we wanted to 0:12:46.880 --> 0:12:50.120 decarbonize properly and we wanted to do carbon consumption. This 0:12:50.200 --> 0:12:54.959 is an enormous task. This is a complete transformation. And 0:12:55.040 --> 0:12:57.160 some academics thing you can do this stuff, and some 0:12:57.280 --> 0:12:59.680 academics things are costs of solar and wind are going 0:12:59.720 --> 0:13:02.760 to fall so quickly, and battery technology is going to 0:13:02.760 --> 0:13:04.960 advance so quickly. This is all going to be fixed. 0:13:05.000 --> 0:13:07.600 I don't agree. There's no evidence I think to support 0:13:07.640 --> 0:13:10.240 that proposition, but he obviously listens to that too, and 0:13:10.240 --> 0:13:13.120 there are different opinions on that. But the politics are 0:13:13.120 --> 0:13:17.000 really straightforward. If you tell the British public you know 0:13:17.080 --> 0:13:19.440 that you are causing climate change, and you and I 0:13:19.480 --> 0:13:22.400 are doing so, we are polluters. It's us, not industry. 0:13:22.520 --> 0:13:25.480 We ultimately buy the stuff, whether it's made in China 0:13:25.640 --> 0:13:27.640 or it's made here. If you tell us that we're 0:13:27.640 --> 0:13:30.800 the polluters, and you say you should stop polluting, and 0:13:30.800 --> 0:13:32.760 you ask me, do I want to not cause pollution? 0:13:32.800 --> 0:13:35.240 Because I don't want to cousse pollution. Now you tell 0:13:35.280 --> 0:13:37.080 me it's going to cost you a lot of money 0:13:37.520 --> 0:13:39.600 and your energy bill is going to go up. And 0:13:39.679 --> 0:13:42.560 this is a huge resource cost, which means that the 0:13:42.559 --> 0:13:47.319 British have to stop having zero savings nessive capital appreciation, 0:13:47.440 --> 0:13:49.680 but they have to set aside the kind of sums 0:13:49.679 --> 0:13:53.600 that say Chinese citizens sit aside for investment, your standard 0:13:53.600 --> 0:13:56.240 living might fall. You're not going to do it. It's like 0:13:56.320 --> 0:13:59.080 telling people that you know, the cost of COVID ought 0:13:59.080 --> 0:14:01.040 to be paid for, better off at the end of 0:14:01.080 --> 0:14:03.199 it than you were at the beginning. Well, people don't 0:14:03.200 --> 0:14:05.760 want to hear it. So what better to tell people 0:14:05.880 --> 0:14:09.439 is a win win win. You're going to get clean energy, 0:14:09.840 --> 0:14:12.360 it's going to cause economic growth. Oh and it's all 0:14:12.400 --> 0:14:15.560 going to be cheaper right now until you really get going, 0:14:16.040 --> 0:14:18.760 you're not being found out. But now he is being 0:14:18.800 --> 0:14:21.160 found out. Now the government is being found out. Now 0:14:21.160 --> 0:14:24.960 we have the highest electricity industrial prices and nearly the 0:14:25.000 --> 0:14:28.520 same for domestic in the developed world, and we are 0:14:28.680 --> 0:14:32.600 hemorrhaging industry. We've lost the fertilizer industry. We've lost our 0:14:32.640 --> 0:14:36.520 fiber glass industry. You know, these costs are real. Now 0:14:36.680 --> 0:14:41.120 there are things you can do which can protect your 0:14:41.240 --> 0:14:45.360 industrial frame by charging them the marginal costs and not 0:14:45.440 --> 0:14:48.440 the full costs of the system, as most other countries do. 0:14:48.720 --> 0:14:51.600 We choose not to do that. Now I think we 0:14:51.960 --> 0:14:54.520 hit the kind of reality wall. It isn't going to 0:14:54.560 --> 0:14:56.920 be three hundred pound cheaper unless the gas price falls 0:14:57.000 --> 0:14:59.880 very sharply, and again not for h the reasons that 0:15:00.040 --> 0:15:02.760 similar bound things. And now we have to rebase and 0:15:02.840 --> 0:15:04.840 the problem for the government is I think half the 0:15:04.880 --> 0:15:08.960 government understand that and half the government don't. And that's 0:15:09.000 --> 0:15:12.720 the political sort of dividing line. I'm glad I'm not 0:15:12.720 --> 0:15:13.840 a politician. 0:15:33.400 --> 0:15:37.600 Now. If all economic activity is energy transformed one way 0:15:37.680 --> 0:15:41.920 or another. If we really do want to properly see 0:15:41.960 --> 0:15:44.080 the UK economy grow and not just grow, but do 0:15:44.120 --> 0:15:48.440 you know see GDP per capitalize, improve living standards etc. 0:15:48.760 --> 0:15:52.040 And have a hope of financial survival, and the fiscal 0:15:52.120 --> 0:15:55.000 environment that we're in, we do have to find a 0:15:55.040 --> 0:15:59.640 way to make UK energy cheaper. So what is the 0:15:59.640 --> 0:16:02.840 answer to your mind? What is the answer to finding 0:16:02.880 --> 0:16:07.320 a way through this maze of wanting to humor the 0:16:07.400 --> 0:16:11.360 idea of net zero but also wanting to at least 0:16:11.400 --> 0:16:13.240 maintain people's living standards. 0:16:13.840 --> 0:16:17.000 So what we have to do is to say what 0:16:17.320 --> 0:16:21.320 matters in that energy space for the success of the 0:16:21.320 --> 0:16:25.280 British economy as an open economy in a tradeable world, 0:16:25.400 --> 0:16:27.120 even with the tariffs and all those kinds of things 0:16:27.160 --> 0:16:30.800 around it. So what really matters is what industry pays 0:16:30.880 --> 0:16:34.360 for energy. If you and I pay too much for energy, 0:16:34.360 --> 0:16:36.680 it's just like I have being highly taxed. If you 0:16:36.760 --> 0:16:38.880 really want this high cost route that we're going down 0:16:39.240 --> 0:16:44.280 to switch the cost heavily from industry to the domestic consumer. 0:16:44.720 --> 0:16:47.760 And from an industry's point of view, I mean in economics, right, 0:16:48.000 --> 0:16:50.760 you don't say these are my costs, therefore this is 0:16:50.840 --> 0:16:54.600 my price. Say what's the market price? Can I get 0:16:54.640 --> 0:16:57.600 my costs in line to meet that market price? Okay? 0:16:58.080 --> 0:17:00.360 Urs market price actually very high too. It's got an 0:17:00.440 --> 0:17:02.640 energy problem. So out there in the world when it 0:17:02.680 --> 0:17:08.199 comes to the energy intensive bit us costs are enormously lower. 0:17:08.840 --> 0:17:12.320 So are China's. Actually, China's burned half the world's coal. 0:17:12.359 --> 0:17:15.200 It's got fantastic amount of cheap coal coming its way. 0:17:15.440 --> 0:17:19.400 America's just the from a purely energy point of view, 0:17:19.640 --> 0:17:24.119 the energy utopia pastily cheap gas, largest or producer in 0:17:24.160 --> 0:17:28.160 the world. Now, lots of wide open spaces for developing renewables. 0:17:28.240 --> 0:17:30.560 It's a win win win in almost all of these Moneys. 0:17:30.560 --> 0:17:32.879 And very very and very very open to nuclear now 0:17:32.920 --> 0:17:36.120 the US very open ms and putting up new stations 0:17:36.160 --> 0:17:37.679 all over the place, etcetera, in a way that we 0:17:37.720 --> 0:17:37.960 are not. 0:17:38.840 --> 0:17:41.240 Well, let's come to newcle a second. But so the 0:17:41.280 --> 0:17:45.360 point is we should charge a price to industry which 0:17:45.480 --> 0:17:49.360 enables it to compete in markets, and that means separating 0:17:49.400 --> 0:17:53.840 out who pays the marginal costs of generating power, and 0:17:53.920 --> 0:17:56.840 everyone should pay their marginal costs. And the reality is 0:17:56.840 --> 0:17:59.120 we should switch quite a lot of those costs from 0:17:59.200 --> 0:18:04.240 large industry to us, the consumers. And politically that is 0:18:04.320 --> 0:18:08.040 extremely difficult, but that's the thing to do immediately, because 0:18:08.119 --> 0:18:11.600 there is an industrial crisis out there. You know, who 0:18:11.680 --> 0:18:13.919 in the Labor Party thought they'd be nationalizing the steel 0:18:13.920 --> 0:18:17.600 industry within twelve months. Who thought the car industry would 0:18:17.600 --> 0:18:20.640 collapse quite as fast as it has, even though Brexit 0:18:20.680 --> 0:18:23.280 did it. Who thought that there'll be another refinery to 0:18:23.320 --> 0:18:25.639 join Grangemouth on the way out by the way, to 0:18:25.680 --> 0:18:28.639 turn them into import terminals for what they were exports. 0:18:28.760 --> 0:18:31.640 Who thought that the fertilized industry would collapse. Who thought 0:18:31.680 --> 0:18:34.960 the buyer fuels industry collapsed. This is what real large 0:18:35.080 --> 0:18:39.080 electricity prices do. It's a crisis and it has an 0:18:39.160 --> 0:18:45.119 obvious answer. Charge the competitive price, not the full costs, 0:18:45.480 --> 0:18:47.920 and then recover the full cost. You can choose. You 0:18:47.960 --> 0:18:50.080 can make the taxpayer pay for it, you can make 0:18:50.160 --> 0:18:52.959 us the consumer pay for it. But face that and 0:18:53.040 --> 0:18:56.560 tell people the truth behind that proposition. That's the first 0:18:56.680 --> 0:18:59.240 and most important and urgent thing to do. And to 0:18:59.280 --> 0:19:02.600 be fair, the government has begun to act on this 0:19:02.800 --> 0:19:05.879 territory and has set this data two twenty seven to 0:19:05.920 --> 0:19:08.679 come up with something more general. But their mistake is 0:19:08.680 --> 0:19:12.240 to think that our only problem is really large intensive 0:19:12.520 --> 0:19:16.960 producers like steel. Whereas you know, if you make boots 0:19:17.080 --> 0:19:21.560 or shoes or widgets, you know you're competing too. It's 0:19:21.600 --> 0:19:23.760 not you're using a lot of energy for your factory, 0:19:23.960 --> 0:19:26.239 but someone else is producing them over at China at 0:19:26.280 --> 0:19:29.240 lower cost because their energy costs are that So it's 0:19:29.280 --> 0:19:32.199 not just a bit of industry, it's affected. It's the 0:19:32.359 --> 0:19:35.320 whole of the industrial sector. And that's got to be 0:19:35.359 --> 0:19:38.760 faced up to. And that's the crisis and that's the urgency, 0:19:38.800 --> 0:19:40.880 and that's where mister miller Band will have to tell 0:19:40.920 --> 0:19:43.040 you and me, you know what you're going to have 0:19:43.080 --> 0:19:43.680 to pay more. 0:19:44.400 --> 0:19:47.639 Is there also a case for pulling back on building 0:19:47.920 --> 0:19:52.560 renewable energy infrastructure in that there's a lot of wind 0:19:52.800 --> 0:19:55.560 up in and around the UK now and you know, 0:19:55.640 --> 0:19:58.280 on good days when the wind is blowing, almost all 0:19:58.440 --> 0:20:02.280 UK electricity has provided by renewables. And so if that 0:20:02.480 --> 0:20:04.000 is the case, can you get to a point where 0:20:04.040 --> 0:20:05.359 you say, well, that's kind of enough. 0:20:05.560 --> 0:20:07.200 On a good day, it's already. 0:20:06.800 --> 0:20:09.159 Doing nearly all the electricity we need, so maybe we 0:20:09.160 --> 0:20:09.880 should pull back. 0:20:10.480 --> 0:20:12.720 First of all, we're never going to build it as 0:20:12.800 --> 0:20:14.439 fast as that the government thinks we're going to. 0:20:14.760 --> 0:20:14.960 Right. 0:20:15.119 --> 0:20:18.439 The supply chain just isn't there. It's all Chinese or heavily, 0:20:18.680 --> 0:20:21.240 and in the supply chain, the idea that we're going 0:20:21.280 --> 0:20:23.040 to be able to say, you know what, just give 0:20:23.080 --> 0:20:25.400 it the stuff now now we want it because we've 0:20:25.400 --> 0:20:27.280 only got fifty months or so to go, because we've 0:20:27.320 --> 0:20:29.800 got to meet this arbitrary target of two thirty it's 0:20:29.840 --> 0:20:30.840 just not going to happen. 0:20:31.160 --> 0:20:31.360 Now. 0:20:31.640 --> 0:20:33.080 You have to look at the energy system as a 0:20:33.080 --> 0:20:35.760 whole and say what's the balance you want. So in 0:20:35.800 --> 0:20:39.080 the UK, would you want to basically end up running 0:20:39.119 --> 0:20:42.680 your electricity system on wind and solar in the hope 0:20:42.720 --> 0:20:44.680 that you're eventually going to build a bit of nuclear 0:20:44.840 --> 0:20:48.879 and that's it. No, So personally, I wouldn't do fifty 0:20:48.880 --> 0:20:51.560 gigawatts of wind, And I'd look at the prices that 0:20:51.600 --> 0:20:56.159 emerge and what's happened, because these are capital goods, is 0:20:56.160 --> 0:20:58.520 that the cost of capital's doubled, and the cost of 0:20:58.520 --> 0:21:01.280 capital is the most important number. For a nuclear power station, 0:21:01.800 --> 0:21:05.919 for a solar or for wind, they're just capital. And 0:21:06.000 --> 0:21:09.320 you know, the real interest rate is high. The nominal 0:21:09.320 --> 0:21:11.960 interest rate on a thirty year bond is five point seven. 0:21:12.400 --> 0:21:15.560 You know, not long ago, it was naught, right, So 0:21:16.040 --> 0:21:18.440 people assume the costs were all going to come tumbling down. 0:21:18.800 --> 0:21:21.000 This is the most important cost and it's going up. 0:21:21.200 --> 0:21:23.480 And that says non balance. Do you want to do 0:21:23.520 --> 0:21:25.399 it quite as fast? Do you want to do quite 0:21:25.400 --> 0:21:29.080 so much? So pragmatism. Is it going to make any 0:21:29.080 --> 0:21:31.080 difference to climate change if it built a little bit 0:21:31.119 --> 0:21:33.520 less wind a little bit more? No, Would it be 0:21:33.520 --> 0:21:37.240 better to spend that money on encouraging some SMR nuclear actors? 0:21:37.440 --> 0:21:41.240 You know, there are choices, But when you impose an arbitrary, 0:21:41.320 --> 0:21:44.800