Ted Newson is a researcher at The Global Warming Policy Foundation.
The cheapest, most secure electricity grids in the world share one feature: abundant, on-demand power generation. During the last two decades, many European governments have diverged from this model, investing in intermittent power from renewables instead.
China, meanwhile, is using more coal to plug the gap left by shocks to LNG imports. This difference matters. Energy systems dominated by firm power tend to deliver lower prices, greater security, and stronger industrial competitiveness, while recent shocks linked to the Iran conflict are exposing the fragility of import-dependent, intermittent-heavy grids.
Sometimes attributed to excessive decarbonisation commitments, European economies generally have much higher electricity prices than their non-European competitors. A recent IEA report put the average EU wholesale electricity price at $95/MWh, roughly double that of the US and India. Britain’s average wholesale price was even higher at $105/MWh.
In power-intensive industries, this price gap makes a significant difference. Paying less for electricity keeps running costs down and provides a comparative advantage in global markets.
While the US/Iran conflict marks a large supply shock, Europe’s main issue is structural. For too long, green commitments have been prioritised over security and low prices. They need to return to the basic principles of providing cheap, reliable, and abundant power to the people. When governments intervene in the market by incentivising intermittent renewable power generation, there are likely to be trade-offs in the form of higher prices. Much of Europe is an example of where the grid has shifted from free market competition to government subsidies and Net Zero legislation.
Unsurprisingly, the cheapest electricity grids are typically those built around abundant domestic sources of firm power. Countries with large natural gas reserves, such as the US, are far less exposed to shortages because they can meet demand through reliable domestic generation. Conversely, countries that depend heavily on imported LNG and electricity via interconnectors tend to have the highest power prices, as they must secure supply to match demand at a higher cost.
This problem is especially pronounced in Europe, as economies attempt to decarbonise too quickly. Europe now increasingly relies on LNG imports rather than developing dispatchable alternatives like nuclear on a large scale across the continent.
A grid dominated by intermittent power cannot reliably function without extensive battery storage, cross-border interconnectors, and significant investment in transmission infrastructure. Rather than prematurely building grids around intermittent renewables, policymakers should focus on expanding abundant domestic sources of dispatchable power. Other countries are already taking a more pragmatic approach to energy security, with South Korea rapidly building standardised nuclear reactors to secure cheap and reliable electricity. Europe should pursue the same principle of energy self-sufficiency through firm generation in whatever form is most practical, or risk permanently higher electricity costs.
Proponents of rapid decarbonisation point to falling renewable costs – with wind and solar having lower marginal generation costs than any other source. But this is only the cost of producing one additional unit of power; it ignores what it costs to make that power reliable and tied into the grid. The fundamental costs of intermittency come from integrating it into a functioning grid: backup capacity, curtailment, and grid expansion. China illustrates the point clearly. Despite deploying large amounts of wind and solar, it generates most of its cheap power through coal, an on-demand source that keeps prices low precisely because it is available regardless of weather conditions. To supplement that, China is the largest producer of hydroelectricity, a power source that is both renewable and available on demand.
Energy abundant economies take a realist view on energy security and on-demand power sources; keeping prices low, supply secure, and generation high. In accelerating the energy transition beyond what consumers can take, the European economy has become especially dependent on imports and expensive backup capacity. The UK capacity market is expected to cost consumers £4 billion a year by 2030, up from around £1.3 billion today, according to the Office for Budget Responsibility.
Intermittent power sources could still play a supplementary role, provided they are tied into a larger firm power grid. So long as intermittent power can compete without distortionary subsidies or preferential treatment, they should be free to compete within the energy market.
In the future, nuclear expansion will likely reduce Europe’s reliance on gas imports, but in the short run, achieving energy security means looking to natural resources. China, India and the United States are exploiting their domestic energy advantages to support economic growth and industrial competitiveness. Britain should do the same.
A serious energy strategy starts with ensuring that the country has access to abundant, reliable and affordable power.
Ted Newson is a researcher at The Global Warming Policy Foundation.
The cheapest, most secure electricity grids in the world share one feature: abundant, on-demand power generation. During the last two decades, many European governments have diverged from this model, investing in intermittent power from renewables instead.
China, meanwhile, is using more coal to plug the gap left by shocks to LNG imports. This difference matters. Energy systems dominated by firm power tend to deliver lower prices, greater security, and stronger industrial competitiveness, while recent shocks linked to the Iran conflict are exposing the fragility of import-dependent, intermittent-heavy grids.
Sometimes attributed to excessive decarbonisation commitments, European economies generally have much higher electricity prices than their non-European competitors. A recent IEA report put the average EU wholesale electricity price at $95/MWh, roughly double that of the US and India. Britain’s average wholesale price was even higher at $105/MWh.
In power-intensive industries, this price gap makes a significant difference. Paying less for electricity keeps running costs down and provides a comparative advantage in global markets.
While the US/Iran conflict marks a large supply shock, Europe’s main issue is structural. For too long, green commitments have been prioritised over security and low prices. They need to return to the basic principles of providing cheap, reliable, and abundant power to the people. When governments intervene in the market by incentivising intermittent renewable power generation, there are likely to be trade-offs in the form of higher prices. Much of Europe is an example of where the grid has shifted from free market competition to government subsidies and Net Zero legislation.
Unsurprisingly, the cheapest electricity grids are typically those built around abundant domestic sources of firm power. Countries with large natural gas reserves, such as the US, are far less exposed to shortages because they can meet demand through reliable domestic generation. Conversely, countries that depend heavily on imported LNG and electricity via interconnectors tend to have the highest power prices, as they must secure supply to match demand at a higher cost.
This problem is especially pronounced in Europe, as economies attempt to decarbonise too quickly. Europe now increasingly relies on LNG imports rather than developing dispatchable alternatives like nuclear on a large scale across the continent.
A grid dominated by intermittent power cannot reliably function without extensive battery storage, cross-border interconnectors, and significant investment in transmission infrastructure. Rather than prematurely building grids around intermittent renewables, policymakers should focus on expanding abundant domestic sources of dispatchable power. Other countries are already taking a more pragmatic approach to energy security, with South Korea rapidly building standardised nuclear reactors to secure cheap and reliable electricity. Europe should pursue the same principle of energy self-sufficiency through firm generation in whatever form is most practical, or risk permanently higher electricity costs.
Proponents of rapid decarbonisation point to falling renewable costs – with wind and solar having lower marginal generation costs than any other source. But this is only the cost of producing one additional unit of power; it ignores what it costs to make that power reliable and tied into the grid. The fundamental costs of intermittency come from integrating it into a functioning grid: backup capacity, curtailment, and grid expansion. China illustrates the point clearly. Despite deploying large amounts of wind and solar, it generates most of its cheap power through coal, an on-demand source that keeps prices low precisely because it is available regardless of weather conditions. To supplement that, China is the largest producer of hydroelectricity, a power source that is both renewable and available on demand.
Energy abundant economies take a realist view on energy security and on-demand power sources; keeping prices low, supply secure, and generation high. In accelerating the energy transition beyond what consumers can take, the European economy has become especially dependent on imports and expensive backup capacity. The UK capacity market is expected to cost consumers £4 billion a year by 2030, up from around £1.3 billion today, according to the Office for Budget Responsibility.
Intermittent power sources could still play a supplementary role, provided they are tied into a larger firm power grid. So long as intermittent power can compete without distortionary subsidies or preferential treatment, they should be free to compete within the energy market.
In the future, nuclear expansion will likely reduce Europe’s reliance on gas imports, but in the short run, achieving energy security means looking to natural resources. China, India and the United States are exploiting their domestic energy advantages to support economic growth and industrial competitiveness. Britain should do the same.
A serious energy strategy starts with ensuring that the country has access to abundant, reliable and affordable power.