Economic hazards of a forced energy transition: inferences from the UK’s renewable energy and climate strategy


The UK government has recently announced a reorientation of its energy and climate policy, scaling back subsidies to renewables, suggesting that uncontrollable generators, such as wind may be required to meet their own system costs, and emphasizing the need for research and development towards an as yet undiscovered, fundamentally economic, low carbon transition. The government also aims to open the way for nuclear power, and the maximization of oil and gas recovery both from the North Sea, and, on-shore, from hydraulic fracking. The present authors argue that although this policy is self-characterised as a re-liberalisation of the markets, the revision is only in part political, and is better understood as a force majeure response to cost and technical problems with the previous renewables-centred policy. Specifically, subsidies have led to an overheated renewables sector with high costs that will exceed Treasury limits and place heavy burdens on consumers. Subsidies to renewables have also weakened investment signals to conventional generation, leading to low capacity margins that necessitate a costly Capacity Mechanism, in effect a subsidy, to guarantee security of supply. Taken together, these costs are significant, and are a matter for particular concern, since there are already signs of a trend towards a de-electrification of the UK economy, a trend which is undesirable for many reasons, including climate policy.

This is a preview of subscription content, access via your institution.

Fig. 1

Source: DECC (2008), 8. Chart by the authors

Fig. 2

Source: DECC (2015e). Chart by the authors

Fig. 3

Source: DECC (2015a) Table 5.1. Available at

Fig. 4

Source: DECC, Ofgem. Calculations and chart by authors

Fig. 5

Source: DECC, Ofgem. Calculations and chart by the authors. The blue line represents total renewable electricity; the green line shows the subsidized component. The orange diamond point represents the 2010 renewable electricity target, which was missed, and the red line the trajectory needed to meet the electricity contribution to meeting the EU Renewables Directive (2009) in 2020

Fig. 6

Source: DECC (2013). Chart by the authors

Fig. 7

Data source, 2001/2–2014/15, current and historic datasets available at: Data for 2015/16, from National Grid (2015c), 39. Chart by the authors


  1. 1.

    The 25 % figure is a government estimate contained in a document leaked from within the department of Business Enterprise and Regulatory Reform in 2007 (BERR 2007). The text is published on the Guardian website: ( Note that the European Commission estimated the total cost to the EU of the renewable energy target at 24 billion euros in 2020 (See Table 4???). BERR thought that this was an underestimate, but also estimated the costs to the UK at some £6–10 bn (see Table 3, but note that the table unfortunately transposes the figures for a 14 and a 15 % target).

  2. 2.

    Calculated from data collected by DECC for the Renewable Energy Planning Database, and reprocessed by the Renewable Energy Foundation at

  3. 3.

    EdF’s work, and that of others is reported and analysed in Sharman and Constable (2009), 1–4. See also Sharman and Constable (2008).

  4. 4.


  1. Bending R, Eden R (1984) UK Energy: Structure, prospects and policies. Cambridge, Cambridge University

    Google Scholar 

  2. BERR (2007).  Accessed 26 Jan 2016

  3. Byatt ICR (1979) The British Electrical Industry 1875–1914: The Economic returns to a new technology. Clarendon Press, Oxford

    Google Scholar 

  4. DECC (2008). 60th Anniversary: digest of United Kingdom energy statistics

  5. DECC (2014), Estimated impacts of energy and climate policies on prices and bills. prices and bills, Annex 9.  Accessed 26 Jan 2016

  6. DECC (2015a), Digest of United Kingdom energy statistics.  Accessed 26 Jan 2016

  7. DECC (2015b).  Accessed 26 Jan 2016

  8. DECC. (2015c) Accessed 26 Jan 2016

  9. DECC. (2015d) Accessed 26 Jan 2016

  10. DECC (2015e). “Historical Electricity Data”. Accessed 26 Jan 2016

  11. EdF (2006), Energy Review Submission

  12. Hannah L (1979) Electricity before Nationalisation: a study of the development of the electricity supply industry in Britain to 1948. London, Macmillan

    Google Scholar 

  13. Hannah L (1982) Engineers, managers and politicians: the first fifteen years of nationalised electricity supply in Britain. London, Macmillan

    Google Scholar 

  14. IPCC (2014), WG3, AR5, Chapter 6. Accessed 26 Jan 2016

  15. Jevons, W. S. (1865) The Coal Question

  16. Marten AL (2011) Transient Temperature Response Modeling in IAMs. Econ E-J 5:2011–2018

    Article  Google Scholar 

  17. National Grid (2014a). Accessed 26 Jan 2016

  18. National Grid (2014b). Accessed 26 Jan 2016

  19. National Grid (2015a). Accessed 16 Jan 2016

  20. National Grid (2015b). Accessed 26 Jan 2016

  21. National Grid (2015c) Monthly balancing services summary

  22. Office of Budget Responsibility (2015). Accessed 26 Jan 2016. Data from Fiscal Supplementary Tables

  23. Office of National Statistics (2014).–england-and-wales–scotland-and-northern-ireland/mid-2014/sty—overview-of-the-uk-population.html. Accessed 26 Jan 2016

  24. Ofgem (2010), Project discovery: options for delivering secure and sustainable energy supplies

  25. Ofgem (2015a), Electricity security of supply: a commentary on National grid’s future energy scenarios for the next three winters

  26. Ofgem (2015b). Accessed 26 Jan 2016

  27. Ofgem (2015c). Accessed 26 Jan 2016

  28. Prins G et al (2013) The vital spark: innovating clean and affordable energy for all. London School of Economics, London

    Google Scholar 

  29. Renewable Energy Foundation (2011) Electricity policy and consumer hardship. London

  30. Royal Commission on Environmental Pollution (2000). The Changing Climate

  31. Sharman, H., and Constable, J. (2008), Electricity Prices in the UK: Fundamental Drivers and Future Trends (Renewable Energy Foundation: London). Downloadable from

  32. Sharman, H., and Constable, J. (2009), “Going Black or Breaking the Rules?”, Petroleum Review, p 1–4

  33. United States Environmental Protection Agency (2015). Accessed 26 Jan 2016

  34. Weir Lord (1925) Report of the committee appointed to review the National problem of the supply of electrical energy. Ministry of Transport, London

    Google Scholar 

Download references

Author information



Corresponding author

Correspondence to John Constable.

About this article

Verify currency and authenticity via CrossMark

Cite this article

Constable, J., Moroney, L. Economic hazards of a forced energy transition: inferences from the UK’s renewable energy and climate strategy. Evolut Inst Econ Rev 14, 171–192 (2017).

Download citation


  • Renewables
  • Subsidy
  • Green economy
  • System costs

JEL Classification

  • A
  • E
  • N
  • O
  • Q