British Gas chief issues electricity prices alert in hammer blow to Ed Miliband

The boss of the British Gas parent company has warned the push for a net zero power grid will not necessarily cut electricity bills.

In an intervention, Chris O’Shea, chief executive of owner Centrica, said: “The shift to renewable power will NOT materially reduce UK electricity prices from current levels.”

Writing on LinkedIn, he argued the real benefit of moving to net zero energy such as wind and solar is to deliver price stability and protection against future price shocks, rather than lower bills.

“They may give price stability and avoid future price spikes based on the international gas market, but they will definitely not reduce the price," he wrote.

The view is at odds with other industry leaders, such as the boss of Octopus, Greg Jackson, and Dale Vince of Ecotricity - as well as the Energy Secretary Ed Miliband.

His comments strike at the heart of government and Labour Party promises that green energy would lead to lower costs for families.

They also come despite British Gas offering some of its customers cheap or even free electricity on certain days when there's an oversupply of wind and solar power on the grid.

Mr O’Shea’s warning is based on a detailed analysis comparing the cost of renewable energy with gas. He said that while the cheapest renewables are roughly comparable to gas, more exotic technologies such as floating wind and tidal power are up to three times more expensive.

He said: “We need to stop having a polarised debate populated with unsubstantiated, but convenient, sound bites.

“I fully support the move to a cleaner energy system. I am simply very frustrated that people peddle misinformation at best, and disinformation at worst.”

His comments are at odds with Labour’s election campaign claims last year. Then, Ed Miliband pledged that a shift to clean energy would cut household bills by £300 a year by 2030.

The Labour manifesto declared: “Families and businesses will have lower bills for good, from a zero-carbon electricity system.”

Mr Miliband repeated that promise after taking office, saying: “The only way to guarantee our energy security and cut bills permanently is to speed up the transition away from fossil fuels and towards home-grown clean energy.”

But Mr O’Shea says that simply isn’t how the system works.

He pointed to the Government’s Contracts for Difference (CfD) scheme, which guarantees renewable energy developers a fixed, inflation-linked price for each megawatt hour of electricity. If market prices fall below this “strike price”, the difference is added to household bills.

“Wholesale electricity prices in the UK may well be set by international gas prices,” Mr O’Shea wrote. “But the wholesale price does NOT set the price that the majority of consumers pay in the UK.

“That’s because of the Contract for Difference that renewable energy producers get. Essentially, no matter the wholesale price, renewable producers with a CfD get the ‘CfD strike price’.”

Most contracts under the CfD system run for 15 years – locking consumers into those prices.

He cited the average wholesale price of electricity last year at £82.11 per megawatt hour. By contrast, new offshore wind projects secured strike prices of up to £82.16, while solar and onshore wind came in around £70 – not low enough to deliver meaningful savings for bill payers.

More experimental green technologies are vastly more expensive – with floating wind at £195 and tidal stream generation at £240.

Centrica, which supplies around 7.5 million households and 400,000 businesses under the British Gas brand, is a major investor in everything from nuclear and gas to low-carbon battery and solar projects. The company employs 21,000 people.

Mr O’Shea’s analysis drew support from some quarters.

Richard Tice, Reform UK’s energy spokesman, said: “Another energy expert admits the British people have been deeply misled. More renewables will not bring the electricity price down.

“We have sacrificed jobs, industries and wealth on a lie. Net zero is the most stupid policy ever imposed on our nation.”

Conservative MP Andrew Bowie, the shadow energy minister, also attacked Labour’s green pledges, saying: “Ed Miliband’s mad dash to net zero by 2050 has been built on ideological dogma, with a total disregard for the consequences inflicted upon the British public.”

However, the Department for Energy Security and Net Zero defended the policy.

A spokesman said: “We are making the UK a clean energy superpower to get off the rollercoaster of fossil fuel markets controlled by dictators and replace that with clean homegrown power we control.”

He added: “That is how we can protect family finances and our national finances.

“As shown by the National Energy System Operator’s independent report, clean power by 2030 is achievable and will deliver a more secure energy system, which could see a lower cost of electricity and lower bills.”

Figures from the International Energy Agency show that UK electricity remains among the most expensive in the developed world – 50 per cent higher than Germany and four times the price in the US.

Despite this, British Gas has recently offered incentives such as free electricity on selected days when there's an excess of renewable energy – an effort to balance grid supply and encourage greener habits. But Mr O’Shea’s core message remains: price stability is not the same as price cuts.