Andy Burnham has outlined ambitions to promote economic growth across all regions of the United Kingdom and to restore a sovereign manufacturing base. However, achieving these goals faces a significant challenge due to the high cost of electricity for British industry, which is currently among the most expensive in the developed world.

Since 2004, the UK has rapidly decarbonized its electricity grid, outpacing most major economies. Despite this progress, industrial electricity prices have risen sixfold in nominal terms, and household prices have quadrupled during the same period. Recent government data from late 2024 indicate that UK industrial electricity prices are the highest among 32 advanced economies, standing 94% above the median. This sharp rise followed the energy market disruptions after Russia’s invasion of Ukraine, which revealed vulnerabilities in the UK's energy security and supply resilience.

Experts propose three key structural reforms to alleviate high electricity costs and support industrial competitiveness. First, they suggest treating the electricity grid as a national infrastructure asset, akin to roads. Currently, the grid is managed by privatized companies like National Grid and its Scottish counterparts. Transferring these network operators into public ownership could generate savings by allowing government borrowing at lower interest rates compared to private investors. Since network charges account for about one-quarter of domestic electricity bills, with more than half of that cost covering debt interest on grid investments, public ownership could reduce consumer costs by billions. It would also enable the government to strategically allocate power and extend targeted discounts to priority sectors.

Second, reforming the capacity market is advised. This system compensates power plants for being available, even when not generating electricity. Gas-fired plants, in particular, can receive payments while idle and then charge premium prices when active during peak demand. Revising or potentially placing these assets under state ownership could improve efficiency and cost-effectiveness.

Third, green levies currently add over £12 billion annually to electricity costs, ranking as a major price driver. More than £8 billion of this amount supports legacy renewables projects funded under the Renewables Obligation scheme, which runs through 2037. Although recent budget changes shifted most of the domestic share of this cost onto general taxation temporarily and partially, experts recommend fully transferring or buying out these subsidy obligations. This could either involve compensating owners at net present value or allowing them to swap existing subsidies for state-backed long-term contracts at current market prices. Doing so would lower bills permanently and correct market distortions that currently make imported gas cheaper than domestically generated green electricity.

Reviewing the marginal pricing structure is also suggested. Presently, gas sets wholesale electricity prices most of the time, despite supplying only 25% to 33% of output, resulting in renewables and nuclear assets being paid gas-indexed prices. Maintaining competitive auctions is supported, but adjustments in payments for non-gas generators could prevent overcompensation and reduce costs.

Collectively, these reforms could reduce power market expenses by approximately £5 billion to £7 billion annually. For the average household, this might translate into savings of about £300 per year. Small and medium-sized businesses could see price cuts near 30%, while heavy industry, already partially shielded from levies, might experience a 10% reduction. Such measures could help narrow the competitiveness gap with international counterparts.

Funding these initiatives remains complex. One proposal involves the government’s National Wealth Fund supplying around one-third of the required capital, absorbing initial losses, while private investors contribute the remainder. Although this would increase government debt, the acquisition of a national energy asset could yield durable benefits by lowering costs, boosting industrial competitiveness, and enhancing strategic control over the energy sector.

The authors, one of whom previously led a major global energy company, emphasize that affordable, clean, and reliable electricity was once a cornerstone of British industrial strength. They argue that with the right reforms, the UK can reclaim that position in the future.