UK should build new gas-fired power capacity to use as backup, government says, despite green targets

Published

1 year ago

March 12, 2024

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The UK needs to build more gas power capacity, the government has said, even while it is also trying to wean the energy system off of fossil fuels to meet climate targets.

It also forged ahead with proposals for regional electricity pricing, with the potential for households and businesses to be charged different amounts in different parts of the country – though other options remain on the table.

Electricity demand is increasing as the UK electrifies things like heating and cars, and the population grows.

Officials have been reviewing how to make sure supply keeps up with demand, is reliable, and reaches the right areas of the country.

Today the Department for Energy Security and Net Zero said it was clear the UK would need new backup gas capacity to provide power that can be fired up on demand, on days when it isn’t windy or sunny enough to get electricity from renewables.

That’s also because some gas plants are due to retire in the coming years.

The decision was long expected, and the energy industry welcomed the reassurance on how to direct its investment.

But some analysts warned extra gas is the wrong solution to the question of how to meet increasing demand and provide flexibility, and said it was a reflection of failure in other areas of energy security policy.

‘We must be realistic’

In a speech today at Chatham House, the Energy Security Secretary Claire Coutinho is expected to say the UK risks “blackouts” without new gas power stations.

“There are no easy solutions in energy, only trade-offs,” she will say.

“And so, as we continue to move towards clean energy, we must be realistic.”

Prime Minister Rishi Sunak said: “I will not gamble with our energy security. I will make the tough decisions so that no matter what scenario we face, we can always power Britain from Britain.”

Labour’s shadow energy secretary, Ed Miliband, said the plans were only necessary because of “fourteen years of failed Conservative energy policy”, including an effective ban on onshore wind, slow progress on energy efficiency and last year’s failed offshore wind auction.

However, he added that if old capacity needs replacing, Labour would be open to some new gas power generation, too.

Mr Miliband said: “Of course we need to replace retiring gas-fired stations as part of a decarbonised power system, which will include carbon capture and hydrogen playing a limited backup role in the system.”

The government argues the move is in line with its climate commitments to cut emissions from fossil fuels because although gas capacity will increase, overall running hours will reduce, as the gas power would not be not firing all the time, but could be scaled up and down as a backup.

‘The government has missed opportunities’

Juliet Phillips, UK energy programme lead at thinktank E3G, said the UK has been a “clean power leader”, given its “continued exponential growth in renewables”.

But the government’s “policy failures” and “missed opportunities” in offshore wind and grid connections left it having to announce new gas power today.

New gas capacity “must come with strict conditions that new plants can be retrofitted with green hydrogen or carbon capture and storage in the future,” she said.

The government wants to boost gas capacity by tweaking capacity market rules, with the costs being covered by billpayers – who would foot the bill for any backup capacity.

It is also considering broadening existing rules for new plants to be able to convert to lower-carbon alternatives, such as by adding carbon capture technology to catch and store emissions.

However, it did not confirm how much new gas capacity was needed.

Kisha Couchman, deputy director at Energy UK, said the power system is undergoing “significant change” as the sources diversify and flexibility becomes more important.

She added: “The challenge is to bring forward changes to support this aim while also providing the certainty essential to bring forward long-term investment – so it’s also right to look at the role that existing mechanisms can play.”

Need for ‘no regrets’ options

Climate and energy thinktank ECIU said there are cheaper, more climate-friendly forms of backup power that could be used instead, such as using EVs to give power back to the grid and battery storage.

The announcement comes as the government gives an update on its consultation for the Review of Electricity Market Arrangements (REMA).

It has ditched a previous proposal to stop linking electricity prices with gas prices.

It is finessing one proposal to bring in regional pricing of wholesale electricity, which could incentivise industry to build in areas where electricity is cheaper, and attract new power projects where demand is greatest.

However, critics have raised concerns over the fairness of the proposal, and ministers have not yet decided if households would be subject to a “postcode lottery” of different costs in different areas.

Another option for continued regional pricing remains on the table.

Guy Newey, CEO at Energy Systems Catapult, said the only way to green the electricity system “in time and without pushing up bills is to move to a market that reflects local supply and demand”.

“It is an essential step forward to see government proposing stronger locational signals in the wholesale market,” he said.

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Trump fires tariff threats at more nations as EU ‘ready for all scenarios’

Published

2 hours ago

July 9, 2025

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Trump fires tariff threats at more nations as EU 'ready for all scenarios'

Donald Trump has revealed a list of more nations set to face delayed ‘liberation day’ tariffs from 1 August.

He has threatened tariffs of 30% on Algeria, 25% on Brunei, 30% on Iraq, 30% on Libya, 25% on Moldova and 20% on the Philippines. Sri Lanka was later told it faced a 30% duty.

Letters setting out the planned rates – and warning against retaliation – are being sent to the leaders of each country.

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They were the latest to be informed of the president‘s plans after Japan and South Korea were among the first 14 nations to be told of the rates they must pay on their general exports to the US from 1 August.

The duties are on top of sectoral tariffs, covering areas such as steel and cars, already in place.

Mr Trump further warned, on Tuesday, that a 50% tariff rate on all copper imports to the US was looming.

He has also threatened a 200% rate on pharmaceuticals and is also expected to take aim at all imports of semiconductors too.

The European Union, America’s largest trading partner in combined trade, services and investment, is expected to get a letter within the next 48 hours unless further progress is made in continuing talks.

The bloc, which Mr Trump has previously claimed was created to “screw” the US, has been in negotiations with US officials for weeks and working to agree a UK-style truce by the end of the month.

The EU has retaliatory tariffs ready to deploy from 14 July but it is widely expected to delay them until such time that any heightened US duties are imposed.

It remains hopeful of a deal in the coming days but European Commission president Ursula von der Leyen told the European Parliament: “We stick to our principles, we defend our interests, we continue to work in good faith, and we get ready for all scenarios.”

While the UK’s so-called deal with Mr Trump is now in force, it remains unclear whether steelmakers will have to pay a 50% tariff rate, deployed by the US against the rest of the world, as some final details on an exemption are yet to be worked out.

The rate is currently 25%.

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Nvidia wins race to become first $4trn listed company

Published

5 hours ago

July 9, 2025

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Nvidia wins race to become first trn listed company

Nvidia has become the first stock market-listed company to achieve a value of $4trn.

Its share price rose by more than 2% at the market open on Wall Street to reach the milestone moment.

It was achieved just over a year since Nvidia overcame the $3trn barrier and overtook Apple, in market cap terms, in the process.

The AI-focused chipmaker has been the darling of Wall Street for many years.

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The value of its shares has risen by 409,825% since its market debut in 1999.

Its status has been cemented thanks to the rush for AI technology – suffering several wobbles along the way – but nothing significant when you refer to the percentage rise of the past 26 years.

The most recent pressures have come from the emergence of the low-cost chatbot DeepSeek and concerns for global AI demand as a result of Donald Trump’s trade war hitting growth.

Financial markets have been taking a more risk-on approach to the trade war since the delays to “liberation day” tariffs in April.

It’s explained by a market trend that’s become known as the TACO trade: Trump always chickens out.

It has helped US stock markets post new record highs in recent days.

The wave of optimism is down to the fact that the president is yet to follow through with the worst of his threatened tariffs on trading partners.

Corporations are also yet to report big hits to their earnings – a fact that is also propping up demand for shares.

If Mr Trump does go all-out in his trade war, as he has now threatened from 1 August, then that $4trn market value for Nvidia – and wider stock markets – could be short-lived, at least in the short term.

But market analysts believe Nvidia’s value has further to go.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said of its meteoric rise: “Once known for powering video games, NVIDIA has transformed into a foundational player in AI infrastructure.

“Its high-performance chips now drive everything from natural language processing to robotics, making them essential to training and deploying advanced AI models.

“Beyond hardware, its full-stack ecosystem – including software platforms and developer tools – helps companies scale AI quickly and efficiently. This end-to-end approach has positioned Nvidia as a cornerstone in a market where speed, scalability, and efficiency are critical.”

He added: “The key question is where it goes from here, and while it might seem strange for a company that’s just passed the $4trn mark, Nvidia still looks attractive.

“Growth is expected to slow, and it’s likely to lose some market share as competition and custom solutions ramp up. But trading at a relatively modest 32 times expected earnings, and over 50% top-line growth forecast this year, there’s still an attractive opportunity ahead.

“For investors, it remains a compelling way to gain exposure to the AI boom – not just as a participant, but as one of its architects.”

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Greater risk to UK economy following Trump’s tariffs, says Bank of England

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5 hours ago

July 9, 2025

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Greater risk to UK economy following Trump's tariffs, says Bank of England

The future of the UK economy is weaker and more uncertain due to President Trump’s tariffs and conflict in the Middle East, the Bank of England has said.

“The outlook for UK growth over the coming year is a little weaker and more uncertain,” the central bank said in its biannual health check of the UK’s financial system.

Economic and financial risks have increased since the last report was published in November, as global unpredictability continued after the announcement of country-specific tariffs on 2 April, the Bank’s Financial Stability Report said.

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These risks and uncertainty, as well as geopolitical tensions, like the wars in Ukraine and the Middle East, are “particularly relevant” to UK financial stability as an open economy with a large financial sector, it said.

Pressures on government borrowing costs are “still elevated” amid significant doubts over the global economic outlook.

Had a 90-day pause on tariffs not been announced, conditions could have worsened, the report added.

The chance of prices rising overall has also grown as tensions between Iran and Israel and the US threaten to push up energy prices.

Possible higher inflation in turn raises the prospect of more expensive borrowing from higher interest rates to bring down those price rises. This compounds the pressure on state borrowing costs.

Mortgages

Borrowing costs for about 40% of mortgage holders are set to become costlier over the next three years as households refix to more expensive deals, affecting 3.6 million households, the Bank said.

Many homes have not refixed their mortgage since interest rates began to rise in 2021, meaning the full impact of higher rates has yet to filter through.

Those looking to get on the property ladder got a boost as the Bank said lenders could issue more loans deemed to be risky, meaning people could be able to borrow more.

Financial institutions can now have 15% of their new mortgages deemed risky every year, up from the current 9.7%.

Riskier mortgages are those with a loan value above 4.5 times the borrower’s income.

Be ‘prepared for shocks’

Despite the global and domestic economy concerns, the outlook for UK household and business resilience remained “strong”, the Bank said.

Investors, however, were warned that there could be “sharp falls in risky asset prices”, which include shares and currencies.

If there are any vulnerabilities in non-bank lenders, it “could amplify such moves, potentially affecting the availability and cost of credit in the UK”.

“It is important that in their risk management, market participants [people involved in investing] are prepared for such shocks.”

The steep market reaction following the tariff announcements in April “highlights that the interconnectedness of global financial markets can mean stress from one market can move quickly to others,” the report said.

Overall, though, “household and corporate borrowers remain resilient”, the Bank concluded.