Britain's electric grid transformation was sparked by political cooperation

• Britain has transformed its national grid to harness renewable energy and generate lower emissions.
• To do so, its political leaders had to cooperate to overcome financial hurdles.
• This article is part of The Great Energy Transition series. 

Take a drive through England's lush, green countryside or look out at the seas that surround the British Isles, and you could see something you may not have expected: a surprising number of wind turbines.

That didn't happen by accident: They are the result of a profound transformation of Britain's national grid. Today, Britain generates zero emissions for almost half of the electricity it uses every year, thanks to policymakers using the tools at their disposal to marshal the financial support and political will necessary to make it happen.

Over the past decade, the island nation has transformed itself into a burgeoning wind superpower. According to Renewables UK, there are currently 8,811 onshore turbines in operation and 2,552 more at sea. Collectively, they are capable of generating enough electricity to power 20 million homes, taking more than 32 million tons of CO2 out of the atmosphere.

Britain's investment in wind power and other renewables like solar marks a dramatic transformation in a country that, in the late 1980s, still generated close to 100% of its electricity from coal.

Tim Lord saw this transformation close up. Today he is head of climate change at the pensions firm The Phoenix Group, but prior to that, he spent over a decade working in government at the Department of Energy and Climate Change. He ended his public-sector career as the director of clean growth, one of the most senior civil servants at the Department for Business, Energy and Industrial Strategy, which took on the climate brief in 2016.

Lord pointed to former Prime Minister Tony Blair joining the European Union in a 15%-by-2030 renewable-energy target in 2007, and the passage of the Climate Change Act in 2008 — which legally required an 80% reduction in emissions by 2050 — as the turning points in Britain's transformation.

"Some people think that they didn't quite know what they were getting themselves in for with that target because it's actually very hard to achieve," Lord said.

As a new government took over in 2010, a coalition of Conservative and Liberal Democrat leaders turned its attention to delivering results.

The plan was to aggressively target the electric grid, which by the mid-2000s had seen a huge increase in gas consumption to substitute for coal, following former Prime Minister Margaret Thatcher's earlier battles with the miners. And back then, generating more nuclear power was politically off the table, so there was only one option: Replacing the coal that remained with renewables.

Navigating market forces through policy

The critical lever to do this was a program called Contracts for Difference, which tried to solve the most challenging financial stumbling block for building out renewables: The price of energy.

"The revenues you got as a wind generator were still tied to the market price, which is set by gas," Lord said.

The problem was that predicting the return on investment for building wind or solar plants was tricky because it was wholly dependent on the price of gas. Because when gas was cheap (as it has been for most of the past two decades), investing in renewable energy was less attractive. When gas prices rise, renewables make a lot more sense.

So the plan was to mitigate the uncertainty by having the government guarantee that it would buy electricity from renewable sources at fixed prices, making renewables a less risky bet for investors.

"What that means is, knowing you're going to get that fixed price reduces the cost of capital a lot because you're taking much less risk and investors are taking much less risk," Lord said.

Others say the risk merely shifted. "The risk does not go away," Rahmat Poudineh, the director of research at the Oxford Institute for Energy Studies' electricity program, said. "You basically transfer risk from one side to another. So you transfer the risk from the investors and the project developer and generation companies to consumers."

But ultimately, Poudineh agrees that the mechanism was effective. What made the program particularly successful, Lord said, was that instead of the government just setting a fixed price, fixed-price contracts were auctioned to energy producers. Over the past decade, this system has led to a fall in renewable-electricity prices, from around £150 to £200 (or about $166 to $221) per megawatt hour to around £40, or $44.

What's perhaps most surprising, though, isn't just the speed at which renewables took off, but how the politics of passing the reforms happened in the first place. The precarious alliance between the two ruling parties was useful, Lord said, because it meant both sides were incentivized to keep the reform process moving.

"The coalition agreement actually became a slightly sacred cow," Lord said. "Those things were going to happen and that was agreed. It gave a kind of stability to the policymaking process, which is actually quite unusual."

"Cornerstone of decarbonization"

In any case, Britain's national grid today is in a much greener position than it once was, and the scale of the transformation is striking. On August 26, 2020, for example, wind energy alone was recorded as providing nearly 60% of Britain's electricity, and it is now fairly common for Britain to go days or weeks at a time without burning an ounce of coal to keep the lights on.

Even better, further decarbonization should be easier now that the initial investments have been made.

"The economics of offshore wind makes much more sense now compared to, say, 10 or 15 years ago," Poudineh said. "The amount of the energy that it produces per wind turbine is increasing, because the scale of the turbines is increasing and the components are becoming more efficient."

"Now we can utilize the industry that was created around the offshore wind and make it a cornerstone of decarbonization," Poudineh added — but there will still be challenges. "The whole process needs to be streamlined — offshore wind takes a lot of time to be developed."

"If you'd said to people 10 years ago that you can run the system completely comfortably with 80% zero-carbon electricity, people would have said, 'No, you can't, it'll fall over,'" Lord said. "It doesn't fall over, and it hasn't fallen over."