Traditionally, all our electricity has come from hot air — steam to be precise. Coal, gas or nuclear reactors boil water, the steam turns a turbine, and the turbine gives us electricity. If we could find a way to hook Ed Miliband up to a turbine, our problems might be solved overnight, because he produces more hot air than any power station in Britain.
This week, as the energy price cap rose yet again, Miliband and his loyal sidekick Michael Shanks took to the airwaves with a familiar refrain. Once again the villain was gas. The blame lay with fossil fuel dictators and volatile international markets. But never fear, said Ed, salvation lies in the breeze. Wind turbines and solar panels will defeat the tyrants and deliver energy independence. Sadly for him, and more sadly for us, this was just another wasted carbon emission.
The narrative is fundamentally dishonest. Yes, gas prices did spike dramatically in 2022 following Russia’s invasion of Ukraine. Your quarterly electricity bill could have bought a decent used car if not for billions in government support keeping the lights on. But that was a short lived crisis, not a structural problem. The market has since stabilised, yet Miliband continues to invoke this temporary shock as justification for policies that will permanently inflate our bills.
The wholesale gas price last year averaged a little over £72 per megawatt hour, which translates to about 7 pence of the 25 pence per kilowatt hour you paid for electricity. In the coming price cap period, it will be 8 pence of the 26 pence you will pay. Even that figure is artificially inflated, because around 2 pence of that represents carbon tax. The Treasury creams off almost £6 billion a year through this hidden levy. Gas still matters, but it is not the monster under the bed that Miliband makes it out to be.
What Miliband is attempting to do is shift the blame for a structural, decades long problem
The real picture becomes even more striking when viewed in historical context. In real terms, the gas price today is similar to, or even lower than, the peaks we saw in 2013 and 2018. Yet household electricity bills are far higher than during those previous episodes — thirty-five percent higher than in 2013, and twenty-five percent higher than in 2018. If gas is supposedly the culprit driving our energy costs skyward, why is electricity so much more expensive now than it was during previous gas price spikes? The answer is simple: it is not gas.
What Miliband is attempting to do is shift the blame for a structural, decades long problem onto the temporary volatility of the Ukraine crisis. He wants voters to believe that the only thing standing between them and affordable power is Vladimir Putin’s gas exports and an insufficient quantity of “home-grown” renewables. The truth is that successive governments have systematically piled costs onto consumer bills for decades, creating a web of charges and levies that have nothing to do with international gas markets.
Start with carbon tax, which has already risen sixty percent this year as Labour vows to align the UK with the more expensive EU emissions trading scheme. Add multiple subsidy schemes for renewables, each with their own administrative overheads and guaranteed returns for investors. Layer on the spiralling costs of balancing a grid that depends entirely on weather conditions. Factor in the money paid to wind farms to stop producing electricity when it is too windy, a perverse outcome that would be laughable if it were not so expensive. Then add the cost of maintaining a one hundred percent overlapping grid of dispatchable gas and nuclear capacity for the inevitable days when the wind does not blow and the sun does not shine.
None of these costs are one-off expenses. They are baked into the system’s architecture, and they grow every year with mathematical certainty. The capacity to demand ratio tells the story in stark terms. Up until 2008, the UK maintained a ratio of around 1.8, meaning that for every unit of average daily demand we had 1.8 units of generating capacity. This provided adequate margins to cover peak demand, scheduled maintenance, and unexpected outages. Today that figure has ballooned to 2.6 and continues to rise relentlessly.
Every new megawatt of wind or solar capacity still requires a corresponding megawatt of gas or nuclear somewhere else on the system to guarantee supply when renewable sources are unavailable. Both sets of assets must be paid for, whether they are generating electricity or sitting idle. This is the fundamental economic contradiction at the heart of renewable energy policy that politicians refuse to acknowledge: you cannot replace reliable baseload generation with intermittent sources without maintaining parallel capacity, doubling the infrastructure costs that consumers must ultimately bear.
These costs are not just guaranteed to grow, we know exactly how much they will increase because many are locked in through existing policy commitments. Carbon tax will continue rising as the EU implements more aggressive emissions allowance reductions. Constraint payments to wind farms will inevitably expand as more turbines connect to a grid that has not been upgraded to handle their intermittent output. The Capacity Market mechanism, which pays gas generators simply to remain available when it gets dark or calm, is already contracted to rise threefold by 2028 because those auctions have already concluded.
Subsidies to renewables will also increase dramatically, because Miliband has removed the cap on the total amount of capacity that can be supported and lifted the ceiling on prices that can be bid in new auctions. This represents a blank cheque written against future consumer bills. Over the next five years, the National Energy System Operator plans to spend over £80 billion, largely on new transmission lines to shift intermittent renewable electricity from remote locations where it is produced to population centres where it is needed.
In the regulator’s own projections, this transmission investment alone will push network charges on household bills from £220 today to £274 in 2026 and to £324 in 2031. That estimate does not yet include the tens of billions more required by distribution networks to handle the additional demand from electric vehicles and heat pumps, both of which the government is simultaneously mandating through other policies.
It is tempting to laugh at Miliband’s wind-powered rhetoric
All of these figures are set in stone. They represent the inevitable outcome of auctions already conducted, policy papers already published, and spending commitments already made. Ed Miliband and the Department for Energy Security and Net Zero know these increases are coming with absolute certainty because they made the decisions that created them. Between them, these various charges and levies will add hundreds of pounds to household energy bills by 2028, even as ministers promise consumers £300 of future savings from renewable energy.
It is tempting to laugh at Miliband’s wind-powered rhetoric. His talent for self parody makes satirical criticism almost redundant. But the consequences for ordinary households are deadly serious. By framing gas as the sole villain in rising energy costs, he systematically distracts attention from the policy decisions that are truly responsible for higher bills.
The government has known for years that retail electricity prices were diverging from wholesale gas prices due to the accumulation of policy costs. The scale of this divergence is staggering: if we include industrial electricity prices, the gap between the wholesale price of electricity and the price consumers actually pay has increased from less than 6p per kilowatt hour in 2003 to nearly 25p today. Yet successive administrations chose to push forward with expensive renewable subsidies regardless, because they preferred the political optics of appearing to champion green technology to the hard work of building a genuinely secure and affordable energy system.
This week’s price cap rise was merely the latest reminder of this failed approach. Your electricity bill is not high because gas is expensive. It is high because you are paying for two complete electricity systems simultaneously. You are paying for a gas fired grid that must always remain available as backup, and you are paying for a renewables system that politicians want to boast about at international climate conferences. You are paying for carbon taxes, for renewable subsidies, for constraint payments, for transmission upgrades, and for capacity auctions that guarantee returns to idle power stations.
Miliband and his colleagues know this because they created this system. Their political strategy is to keep blaming international gas markets in the hope that voters do not notice where their money is really going. Do not believe them.
