Net-zero Emissions Target: Affordability

Lord Offord of Garvel Excerpts

Thursday 3rd April 2025 Lords Chamber

Moved by

[Lord Offord of Garvel]

To move that this House takes note of the affordability of achieving the net-zero emissions target by 2050.

[Lord Offord of Garvel (Con)]

My Lords, how appropriate that this debate should be scheduled on the day after President Trump told the world to grow up, play fair, pay its own way and become self-reliant. The stark reality is that the UK cannot become self-reliant with the most expensive energy in the OECD, hence the title of this debate: that this House takes note of the affordability of achieving the net-zero emissions target by 2050.

I begin by illuminating your Lordships’ House on my personal position on net zero. First, I am not a climate change denier. In fact, in September 2015 I had the great pleasure of going to the North Pole with David Hempleman-Adams, where I witnessed for myself the polar ice cap melting. Secondly, I attended COP 26 in Glasgow in November 2021 as the Scotland Office Minister, where I advocated enthusiastically for net zero 2050 and the leading role the UK played. I pay tribute to my noble friend Lord Sharma, who is in his place today: when the UK took the presidency of COP 26 in 2019, 30% of the world had signed up to the concept of net zero, and when he handed over the role two years later, 90% had done so.

When I recently took on the Opposition Front-Bench role on energy, I had no particular ideology on energy. But, like any sensible business executive taking on a new role, I threw myself into the brief and went on a journey of discovery to learn from external stakeholders and experts what net zero really means for the UK. I shall share what I have found with your Lordships’ House.

Perhaps I should open with just two caveats. The first is from Dieter Helm, considered an expert in these matters and not particularly party aligned. He says that in the UK we have one of the most complicated energy systems in the world. The second caveat is that with the vast sums of money at stake here, there are vested interests which are very loud and very vocal. With those two caveats, let me give your Lordships an overview of what I found on net zero.

In 2004, the UK was energy independent: we could meet our internal demand with our own supply. In the last 20 years, both Governments have reduced their hydrocarbon production such that we now import 40% of our total energy needs, costing £40 billion a year. The result is that the UK now has the highest electricity prices in the OECD: ours are five times those in the US and seven times China’s for industrial usage, and three times the US’s for domestic usage. These exorbitant energy prices mean that the UK has deindustrialised, such that our economy and employment is today 80% services and 20% manufactured goods.

The concept of net zero was to set a target of 2050 whereby we would switch our energy dependence from 75% hydrocarbons to 25% hydrocarbons. Yet today, in 2025, we remain stubbornly dependent on hydrocarbons for 72% of our energy needs, with 40% imported. The reality is that our 20-year experiment with renewables, mostly windmills and solar, has failed because the add-on costs of subsidies, levies and grid upgrades have doubled household bills. Their intermittency means they can never provide reliable and consistent baseload and that we will always be dependent on gas as our reserve.

Meanwhile, renewable storage is impractical. Today in the UK, we have storage for only 30 minutes. Even accessing all the world’s combined storage today would give us only 12 hours. All the while, the upgrades to the grid required to distribute intermittent renewable energy from remote wind and solar farms has been costed by Aurora at £116 billion over the next 10 years. That amounts to £4,000 extra per household or £400 per annum, all of which means that the real cost of renewables is vastly higher than for gas, which can be distributed through our existing grid network, while also being unreliable. Finally, there has been no employment benefit to the UK because most of the capital equipment is manufactured offshore, mostly in China, and only 58% of our highly skilled hydrocarbon workforce is transitioning to renewables and at wages one-third lower, which explains why our highly skilled workforce is haemorrhaging abroad.

In answering numerous questions on this topic, the Minister insists that our energy prices are high because of international gas markets. This is a false narrative. The reality is that from 2008, household electricity prices began to diverge from wholesale prices of gas and electricity, which were broadly stable until 2021 and the Ukraine crisis, so why did household electricity prices accelerate away from wholesale prices faster in the UK than in the rest of Europe in the same period? Indeed, UK industrial electricity prices today are six times the price of wholesale gas, versus three times that in Germany and two-and-a-half times that in France.

Something other than the international wholesale price of gas must be driving higher electricity prices in the UK—and we now know the answer. It is all the subsidies, levies, curtailment payments and grid upgrades required by renewables, particularly offshore wind. Over the next five years, the total cost to households of renewable subsidies and levies is estimated by the OBR to be £95 billion. That is £3,400, or a staggering £680 per annum, per household.

I now turn to baseload. The simple reason why renewables will never be a reliable baseload in any energy system is their intermittency. Sadly, in the UK sometimes the sun does not shine and the wind does not blow. In the UK, gas is relied on as a reserve energy of last resort, or baseload, when the intermittency of renewables means that there is either no supply at peak demand or too much supply at reduced demand. This means that no matter how many wind farms we build, we can never switch off our gas reserve, which in turn results in massive duplication.

As a simple market mechanism, the market price will be determined by the marginal price of switching the gas reserve on and off, which has the grotesque outcome that windfarms are making huge profits based on the marginal gas price rather than on their own costs of production plus a margin. Instead of making our own homegrown gas production cleaner and more efficient, we have weighed it down with the associated cost of offshore wind, such that 50% of the fuel costs of gas power stations are in the form of carbon tax.

Moreover, our gas fleet dates from the 1990s and early 2000s, and is running at only 40% efficiency. Modern combined cycle gas turbines are the most carbon-efficient way to produce power through gas, with emissions at 45% of coal-fired power stations. At current prices, new CCGTs could produce electricity at £65 per megawatt hour, compared with new offshore wind at £90 to £120 per megawatt hour. Their capital cost is £500,000 per megawatt compared with offshore wind at £3 million per megawatt—one-sixth of the price. They also give 100% efficiency, versus 40% for wind. Meanwhile, nuclear remains the most emission-compliant baseload, which is why in France the cost of electricity is half that in the UK.

I turn now to energy security. The geopolitics of 2025 mean that energy is no longer just industrial policy; it is at the very heart of national defence. The UK now imports 70% of its gas, largely from Norway and the USA—thankfully, both friendly nations. Of peak UK gas, 20% comes through the Langeled pipeline between Norway and the UK. What havoc would be unleashed in the UK if that pipeline was ever sabotaged?

It begs the question of why we are shutting down domestic production of oil and gas—which supports an entire sector of 200,000 jobs, brings much-needed tax revenue to the Exchequer and contributes to our net-zero target—while importing gas from the same North Sea via Norway. Why should we put ourselves at the mercy of Chinese imports for offshore wind?

There is an opportunity to reset the geopolitics of Europe. German industry has also been hit by high energy prices, caused by divestment from nuclear and subsequent overreliance on Russian gas. If we want to deweaponise energy in Europe, surely Britain’s role as a clean and efficient homegrown oil and gas producer is crucial to our energy security.

I put it to noble Lords that it is time for a rethink and that 2025 is a good year to reassess net zero by 2050. COP 26, which I attended in Glasgow in November 2021, represented peak global enthusiasm for net zero. The UK led the way, with a commitment to switch from 75% to 25% hydrocarbon use. It is interesting to note that just two months ago, in February, out of the 195 countries party to the Paris climate agreement, only 10 submitted updated climate targets to the UN. Of these, only three G20 countries submitted an updated target, and only one country reaffirmed a 2050 target with a pathway—the UK.

How can it be credible to shut down our homegrown gas baseload, when we account for 1% of global emissions? China is opening one coal-fired power station per week and contributes 31% of global emissions. The fact is that the UK’s extortionate energy prices are damaging our economy, yet the gas both offshore and under our feet in the post-industrial heartlands of central Scotland, the north and the Midlands could generate an exciting new industrial revolution. As good citizens of the world, the UK can legitimately retain the ambition to have the cleanest energy system by 2050, but only if it produces cheaper energy which will increase the prosperity and security of our citizens.

Net zero 2050 is a laudable ambition that was passed through the House of Commons in 70 minutes in 2019, without any real assessment of its achievability. It has now become a straitjacket that is preventing the UK from resuming our place in this modern world as an industrial, technological and military powerhouse. In 2025, it is now clear to see that it is neither practical nor affordable, and it behoves all of us to think again. That is why I am proud that my party and my leader, Kemi Badenoch, has had the courage to grasp this thorny nettle. She made it clear in her keynote speech two weeks ago that net zero 2050 is unachievable. This requires our party in opposition to do some serious work to set out an alternative plan for the citizens and businesses of the UK—a plan that, at its heart, is affordable.

--- Later in debate ---

[Lord Offord of Garvel (Con)]

My Lords, I thank all noble Lords who have contributed to this very important debate. I pay tribute to the noble Lord, Lord Rees of Easton, for a very elegant maiden speech. Of course, the whole point of debate is to challenge consensus, and I am delighted that I have been able to do that today. Was it not Benjamin Franklin who said that when everyone is thinking the same thing, no one is thinking?

Allow me to sum up as follows. Our energy is the most expensive in the developed world. This is self-inflicted and it is not fair on ordinary working people, who pay the price. It is grotesque and unfair to see billions of pounds in curtailment subsidies going to owners of what are quite often foreign-owned wind farms, just because the wind blows too hard at the wrong time. Net zero is a laudable aim, but the purpose of this debate is to ask how we reassess it, not remove it, because we are in danger that the public will begin to see this as the biggest transfer of money from the poor to the rich since feudal times. Make no mistake: these green levies and taxes on working people are viewed as attacks on working people and a drag anchor on our industry. We must not allow that to happen or to be the perception.

Therefore, my argument is simply that 2025 is 25 years away from net zero 2050, so this is a good time to reassess the plan in the light of reality and to re-evaluate our energy strategy, with the simple objective that we must make it affordable and secure. We are living in different times from when this was moved in 2019. We need to make our energy affordable and secure. We need to reindustrialise our great nation. We need to get our proud people back to work. We need to be strong and independent in an uncertain world. We may well need to rebuild our military capability to keep us strong and protect our citizens, but above all, we need to give comfort, security and prosperity to all the inhabitants of these islands.

Therefore, it is high time that this House takes note of the affordability of net zero 2050. I commend this Motion to your Lordships’ House.

Motion agreed.