The Urgent Need to Address Britain's Energy Crisis
Even before Russia's invasion of Ukraine in early 2022, years of government intervention in energy markets had been distorting electricity systems and driving up costs for consumers and industry. The introduction of the energy price cap in 2019 was a significant factor in this trend. The conflict sent wholesale prices surging, making the rising costs impossible for politicians to ignore any longer. Now, with the initial shock receded, electricity prices remain near record levels, sustained by accumulated policy burdens that the Labour administration under Ed Miliband seems determined to reinforce.
High Costs and Rising Demand: A Double Challenge
British industrial power prices are currently 90 percent higher than the average of wealthy European economies. This disparity has led to heavy industries struggling, folding, or moving production overseas, resulting in job losses at home. Household bills are 20 percent higher than elsewhere, despite price caps and taxpayer-funded support, leaving families feeling the financial pinch and increasingly vulnerable to cold weather. Compounding this issue, demand for electricity is increasing for the first time in two decades. The National Energy System Operator forecasts that demand will rise by 14 percent by 2030, 37 percent by 2035, and anywhere from 93 to 175 percent by 2050, driven by data centre construction and the electrification of rail, cars, heating, and industry.
It is clear that Britain needs new power generation urgently, but centralised planning is not the solution. In any other sector, such a surge in demand would prompt immediate action. However, Britain's energy sector operates differently, with minimal market mechanisms. Energy Secretary Ed Miliband has openly expressed his desire for state control and ownership of the energy market. In just 18 months, his administration has established Great British Energy, a state-backed investment outfit, mandated near-complete grid decarbonisation by 2030 without regard for feasibility or cost, approved and subsidised a massive new nuclear plant with co-ownership, and prioritised grid connections based on civil servant decisions rather than market forces.
The Failures of Government Intervention
Politically motivated subsidies and state direction, initiated under previous Conservative governments, have been entrenched by the current Labour administration. This approach prevents technologies from standing on their own, forcing Brits to pay twice—through higher household bills and taxes. If Britain continues down this path, it will fail to meet rising demand. No government can accurately predict which new technologies will emerge, succeed, or fail, nor can it maintain long-term planning consistency. For instance, just months before becoming Deputy Prime Minister, Nick Clegg dismissed nuclear power as "not even an answer" due to lengthy construction times.
What is needed is the dynamism of the private sector and an energy market that functions effectively—boosting choice, meeting demand, and lowering prices. Fortunately, such a market already exists, and it is time to empower it. A new report from the Centre for Policy Studies provides a comprehensive examination of Britain's energy quagmire and offers a market-driven plan for resolution.
Market-Driven Solutions in Action
The report highlights under-reported but growing energy generation projects with strong private sector support or entirely private funding. Renewables are often criticised for relying on taxpayer subsidies, yet many are unaware of successful private initiatives. For example, the largest currently operating solar farm in the UK, the 373 MW Cleve Hill project in Kent, has a private contract from Tesco for two-thirds of its output. The second largest, the 75 MW Llanwern farm in Wales, is entirely privately funded.
These Power Purchase Agreements (PPAs) allow businesses to secure long-term control over their energy and pricing, with increasing company involvement. The European PPA market more than doubled between 2020 and 2025, but Britain ranks only fifth in market size. There is significant room for improvement. The report outlines guiding principles for market-driven energy policy, including subsidy sunsets for new technologies to enable scaling and competition on a level playing field, and emphasising that the government's primary role should be ensuring supply security, not dictating market shape.
The Path Forward: Empowering Markets
Many energy-intensive industries, such as steel mills, refineries, and factories, have already been crippled by high energy prices and state intervention in the electricity sector. Without drastic changes toward market-driven policies, the remaining industries may face a similar fate. As the report's title suggests, it is time to give power to the markets. By leveraging private sector innovation and reducing government control, Britain can lower costs, meet rising demand, and secure a sustainable energy future.
