Britain is heading for an “economic catastrophe” due to high energy prices, a leading analyst has warned as new figures reveal the huge scale of the country’s energy collapse.
In a new report released by think tank the Institute of Economic Affairs, analyst David Turver says Britain now has the most expensive industrial electricity prices in the developed world, which he argues is contributing to deindustrialisation and poverty.
His report shows energy consumption across the UK has plunged by 29.2 per cent since its peak in 2005 – while the amount used by British industry has fallen by a staggering 45.3 per cent since 2004.
He argues soaring energy costs have been a major factor in Britain’s economic stagnation.
Across the world, Britain is now using roughly half the energy per person of the average high-income country, around half that of Sweden and 21 per cent less than the EU average.
Americans use almost three times as much energy per head as Britons, while Canadians consume nearly three-and-a-half times as much.
“We can see that we have dramatically reduced energy consumption. This cannot be explained by increased efficiencies as other countries have not seen a similar fall,” Mr Turver said.
He added that “luxury beliefs” about green power had driven up costs and warned: “Cheap and abundant energy is a fundamental prerequisite to a thriving and prosperous economy.”
The report warns carbon taxes and high energy costs had helped to leave British industry vulnerable
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GETTYUsing Government figures, he also estimates the total cost of Net Zero and energy-related subsidies at £585billion over many years.
This includes the cost of supporting renewable electricity, including wind and solar.
The raw figures do not take into account the hypothetical costs of replacing this power with other sources or any upgrades to the grid that would be needed without green power.
He argues renewable subsidies, carbon taxes and the additional costs of backing up, balancing and expanding the electricity system have been major factors behind Britain’s rising electricity prices.
And he warns the bill is set to rise further. His report says keeping the electricity grid stable when supply rises and falls cost £2.7billion last year, with another £1.3billion spent ensuring backup power was available when needed.
Mr Turver says these costs are set to more than triple to over £12billion a year by 2030 as Britain becomes more reliant on wind and solar power.
Mr Turver said: “Britain’s drop in energy consumption means the UK is on a path to poverty and in the end that leads to economic stagnation, de-industrialisation at best and at worst economic catastrophe.
“A lot of people say renewables are cheap. But cheap solar and wind power rely on expensive machines to convert energy to electricity and need to be subsidised because they are both unreliable.
“Relying on intermittent, low density and expensive renewables is relying on the worst source of energy.”
Energy is one of the fundamental reasons Britain has struggled to grow
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GETTYHe accused ministers of being “asleep at the wheel” and warned the combination of falling energy consumption and soaring industrial electricity prices was putting Britain on a “path to impoverishment”.
His analysis forms part of the IEA’s forthcoming book The Great Stagnation: Why Britain Stopped Growing, which examines explanations for Britain’s two-decade growth slowdown.
Mr Turver argues energy is one of the fundamental reasons Britain has struggled to grow and that the dramatic reduction in energy use should be regarded as an economic warning rather than simply an environmental success.
His international comparison shows UK energy consumption per person fell by an average 2.4 per cent a year between 2008 and 2024 – a faster fall than in the EU, US, Canada and Japan.
Over the same period, UK GDP per head grew by just 0.4 per cent a year, according to his analysis.
He insists the scale of Britain’s decline cannot be explained by efficiency and warns that expensive energy is squeezing precisely the industries Britain needs to generate growth.
By contrast, world energy use per person increased by around 0.5 per cent annually while GDP per head grew by close to two per cent a year.
Countries including China and South Korea increased their energy use while growing considerably faster.
The Government argues its drive towards clean power will ultimately lower bills, increase energy security and protect Britain from volatile international fossil-fuel markets.
It also argues that greater energy efficiency means an economy can grow while using less power and that Britain’s long-term move away from heavy manufacturing has contributed to declining energy consumption.