The Conservatives Have a New Energy Plan. The Bigger Fix Isn't In It.

The Conservatives unveiled a new energy plan today, to scrap the net zero framework they built and prioritise cheap power instead. A report commissioned from Onward, the centre right think tank, alongside advisory firm Transira Energy, claims households could save £540 a year if the UK reoriented its grid around a mix of gas, nuclear, and fewer renewables. Shadow energy secretary Claire Coutinho will tell anyone who'll listen that Labour's Clean Power 2030 target is making electricity expensive for ordinary families. That critique contains some truth. What I find slightly disorienting is who's making it.

The Carbon Price Floor, a tax on carbon emissions from power stations designed to incentivise low carbon investment was introduced by the Conservative-Liberal Democrat coalition government in April 2013. The 2050 net zero target was legislated by Theresa May's Conservative government in 2019, making the UK the first major economy to do so. The UK Emissions Trading Scheme, which forces power stations, heavy industry, and aviation to buy allowances for every tonne of carbon dioxide they emit, succeeded the EU ETS after Brexit. These aren't Labour inventions. The architecture the party is now calling dogma is, in large part, their own.

None of this is simply a historical curiosity. Cost of living pressure is real. Businesses have stayed cautious, hiring has been restrained, and more people are relying on benefits to keep pace with bills. Energy sits near the top of household concerns and the political pressure to act on it is genuine. I don't doubt that the Conservatives need a credible offer on this. But the question worth asking is whether the offer they've made is actually the most effective one available.

The £540 figure rests on a modelled comparison between two future grid scenarios, a net zero pathway versus a cheap power pathway, neither of which yet exists. The Energy and Climate Intelligence Unit pointed out quickly that renewables cut wholesale electricity prices by almost a third in 2025, and that gas prices are currently near a three year high, driven by conflicts in the Middle East and market volatility beyond the UK's control. Orienting more of the grid around gas doesn't obviously mean cheaper energy. It means greater exposure to the same price swings that caused the 2022 energy crisis. The ECIU also notes that around 90% of North Sea oil and gas has already been extracted, making it a poor long term bet for energy security regardless of what targets are in place.

Here's the reform that isn't in the announcement. According to Ofgem, roughly 40% of an electricity bill is wholesale energy cost, the portion determined by the marginal pricing system. That system sets the price for all electricity every 30 minutes based on the most expensive generator needed to balance supply and demand. In practice, gas fired plants set that price approximately 60% of the time. So when wind turbines are generating 90% of what the grid needs in a given half hour, the price for all of it including the cheap renewable portion is still set by the 10% coming from a gas plant. It's a pricing mechanism built for a grid that no longer quite exists.

A generation based pricing model would pay each generator closer to its actual production cost. A minimum revenue floor for gas plants would keep them financially viable and available for when the grid genuinely needs them, without allowing them to set the price for power they're barely contributing to. If the wind is doing most of the heavy lifting, households would pay something closer to what wind actually costs to produce. The saving could be considerably larger than £540 a year and could arrive sooner, because it works with the grid we have now rather than waiting on a future scenario to materialise.

Policy levies are the other significant slice. The Contracts for Difference scheme, which was designed to give developers certainty on revenue, includes payments to generators when the grid doesn't need the power they're producing. Reforming that mechanism, so that payments reflect actual demand rather than theoretical entitlement, would reduce a real and unnecessary cost. It wouldn't dismantle the investment case for renewables, but it would stop rewarding capacity that isn't being used.

The UK Emissions Trading Scheme is the more complex argument. A carbon price that creates an incentive to clean up is, in principle, sensible policy. The concern is that when those costs fall unevenly across industries, they can accelerate the movement of energy intensive production offshore which doesn't reduce global emissions so much as relocate them. That's a legitimate design problem worth a serious political conversation. What it doesn't obviously call for is wholesale abolition dressed up as common sense.

I find myself thinking that the Conservatives have identified a real problem, that energy costs are too high and that the current system places too much of the burden on the wrong parts of the bill but have reached for the most politically legible lever rather than the most structurally effective one. Ditching net zero makes a clear ideological statement. Reforming the marginal pricing mechanism is harder to explain in a press release. But it's the change that would actually move the number on the bill.