British Steel’s Scunthorpe plant is losing one million pounds a day. Steep energy prices continue to put this plant, like many others, further into the financial red. This not only puts 1,700 of the worker’s jobs at risk, but also puts UK manufacturing companies which rely on its steel in an uncertain position.
Therefore, the Energy Security and Net Zero Secretary, Grant Shapps, and the Levelling Up Secretary, Michael Gove, have called for a £300 million subsidy for British Steel, arguing that the company “does not have a viable business without government support.” This may keep the plant open temporarily, but it is costly and fails to solve the long-term problem – high energy prices.
High energy prices do not just harm existing industries; they stop industries of the future from opening in Britain too. If Britain wants to become an AI superpower, it will need a cheap supply of power. Otherwise, it will not be economically viable to run the large processing centres needed to train the complex AI models. Data centres, which are necessary to do anything online, could use more than a quarter of Britain’s energy by 2029. When multinational companies decide where to build new plants, energy costs are a key consideration. In short, the high energy prices plaguing the UK will deter foreign investment and act as a barrier to future growth.
While Russia’s invasion of Ukraine led to a 500% spike in wholesale electricity prices, high energy prices were already holding back the British industry long before the conflict. Out of 230 countries and territories, the UK was placed 190th in a ranking of energy prices in 2021. These high prices push up costs for consumers and erode profitability for industry.
To give British industry the support it needs, it is essential to boost domestic power production. New renewable projects already have lower lifetime energy costs of £44 to 57 per megawatt hour compared to gas’ £85, and are insulated from commodity price spikes Private investment into new renewable and nuclear small modular reactors (SMRs) is ready to go, but the planning system is holding Britain back.
Building new onshore wind, one of the cheapest forms of energy, is effectively banned in England due to planning restrictions. Just one objection to an onshore wind farm can stop an entire project being built. Consequently, England has built just two onshore wind turbines in the last three years. The easiest way to rectify this is to change how onshore wind is approved and allow schemes to go through the standard local planning system with the opportunity to hold a referendum if enough local residents object to the scheme.
The planning system also slows down offshore wind and solar power, which offer cheaper power for Britain’s industries. The UK is already the second-largest offshore wind market in the world. However, meeting the Government’s ambition to increase offshore wind capacity from 13.9 to 50 gigawatts by 2030 will be challenging. An offshore wind project currently takes up to 12 years to complete, with significant time spent on environmental impact assessments, consultations and development consent orders. Construction takes just two years typically. A recent wind farm development, Hornsea 3, was slowed down by the need to complete a more than 10,000 page environmental assessment.
To get more offshore wind farms up and running quickly, the Government should radically simplify the planning process for key national infrastructure and follow Spain’s lead in waiving environmental assessments in areas with low or moderate environmental significance unless it is specifically requested by a public body.
The Government should also give industry the right to install rooftop solar panels on factories that are outside conservation areas, which would avoid the onerous requirement to get planning permission for installations greater than one megawatt.
Besides renewables, the Government should also focus on constructing new SMRs, which would reduce the time and cost of building nuclear power sources. Britain was the first country to build a full-scale commercial nuclear power station, but it has not completed a new station in 27 years. SMRs provide a solution by offering the opportunity to simultaneously build several prefabricated reactors in a factory rather than expensive, customised one-off projects. This could grow a new British industry; 80% of the components by value used by Rolls-Royce SMR will come from Britain. These are then shipped to sites that can be smaller than traditional nuclear stations. But this economy of scale will be lost if SMRs are forced to navigate the same complex planning process as full-scale nuclear projects. Enabling SMRs to be easily built on existing nuclear sites or former coal power stations sites would be a good start.
If we want to save British industry, we must start with the basics. Reforming our planning system to facilitate more renewable and nuclear power would lower energy prices.. Cheaper, domestic power could provide energy security that would underpin future investment and avert the risk of geopolitical instability interrupting Britain’s energy supply. As public finances come under further pressure, fixing the planning system would unlock billions of pounds in private investment, which would lower energy bills for British manufacturing and help make UK industry more competitive.
Ben Hopkinson is a Policy Researcher at Britain Remade.
This article was published in the latest edition of Centre Write. Views expressed in this article are those of the author, and not necessarily those of Bright Blue.
Read more from our August 2023 Centre Write magazine, ‘Back to business?’ here.
