What the Figures Show

To measure the UK’s energy competitiveness, we have tracked the relative price of electricity for both domestic and industrial consumers across the English Channel, using data published by the International Energy Agency and adapted into sterling terms by DESNZ. To this data, we have added more recent data-points for 2025, imputed from PPI readings.

The industrial electricity price data reveal that British industrial concerns pay 81% more per kilowatt-hour of electricity than French firms. This industrial energy price premium is at its highest level since 2006, when it briefly spiked due to an increase in oil and gas prices (on which the UK was much more reliant for electricity generation). Before that, it had not been higher since 1981.

To make this concrete: A very large 500 MW data centre, assuming an average utilization of 15%, would consume 657 GWh of electricity a year. At French prices, this would cost £92 million a year. At British prices, it would cost £167 million.

What Drives This Difference

These differences are not driven by direct taxes on electricity. In 2024, French taxes on industrial electricity use were 3.51p/kWh, whereas in Britain, these taxes were only 1.72p/kWh.

Instead, the difference is largely driven by the higher underlying cost of British electricity. Some of these costs are taxes, imposed at the generator level, such as Carbon Price Support. But more important is the UK’s reliance on a combination of expensive renewables (currently largely funded by billpayers, though increasingly less so) and a gas backstop. France, by contrast, enjoys reliable, low-carbon electricity from nuclear power plants that were relatively affordable to build at the time.

Wind subsidies, in particular, are driving up electricity prices, especially as wind power becomes an increasingly dominant source. Firstly, curtailment payments mean consumers pay not only for the electricity they use but also for wind electricity that was generated and then thrown away because the grid couldn't use it.

Secondly, when wind output is high, it floods the wholesale electricity market, often driving the spot price of power down to near zero or even into negative territory. This may sound good, but consumers often cannot benefit from these low prices. This is because the Government’s Contracts for Difference scheme fixes the price that wind generators receive. These CfDs will become increasingly expensive as wind patterns increasingly drive electricity prices.

These volatile prices also undermine the economics of more reliable power sources, like gas. To cover their costs and remain operational, these plants must command higher prices during periods of low wind (when they are desperately needed) or receive subsidies from the capacity market, leading to greater price volatility and higher average prices for consumers. Just as importantly, gas turbines are most efficient when running at or near full capacity. When frequently ramping up and down to follow erratic wind output, they operate inefficiently.

The obvious alternative to wind power to achieve decarbonisation is nuclear energy. However, as we laid out in The Growth Agenda and as the Fingleton Review has highlighted to the government, Britain has a hostile regulatory environment for new nuclear. A small number of changes to the operating model and risk tolerance of the Office for Nuclear Regulation could ease these barriers and get more reactors built.