The UK is entering a critical phase in its energy transition. While per capita energy consumption has declined sharply, over 30% lower than twenty years ago, this efficiency gain is being offset by a troubling confluence of factors: declining domestic energy production, aging infrastructure, and a surge in demand led by the expansion of energy-intensive technologies such as artificial intelligence.

North Sea oil and gas output continues to taper off, and the country’s aging nuclear power stations are approaching the end of their operational life. Meanwhile, the intermittent nature of renewable sources, brought into sharp focus by a recent drop in wind power, underscores the challenge of relying on renewables alone to meet future demand. Simultaneously, for the first time in nearly three decades, electricity consumption is rising, prompting renewed concerns over energy security.

Government figures show that total energy production fell by 1.5% in the first quarter compared with the same period last year, while demand rose 2.5%. The shortfall has been bridged in part by imports, particularly liquefied natural gas (LNG) from the United States, which jumped by 43% year on year.

Electricity demand in 2023 reached 259 terawatt-hours (TWh), of which 235 TWh was generated domestically and 24 TWh imported. Seasonal strain is most acute in winter, when domestic generation struggles to keep pace. While renewables accounted for 46% of the UK’s power generation in Q1, the 8.1% decline in total generation due to lower wind output highlights the vulnerability of a weather-dependent system.

Against this backdrop, nuclear power is regaining strategic prominence. Currently contributing just over 10% of the UK’s electricity, nuclear energy is set to be scaled up. The government has outlined a package of planning reforms to accelerate deployment of Small Modular Reactors (SMRs), with the goal of easing long-standing bottlenecks in permitting and site selection. Key changes include:

• Bringing SMRs under national planning frameworks for the first time
• Scrapping the restricted list of eight designated nuclear sites, enabling development across England and Wales
• Removing time constraints on planning rules to support long-term investment
• Establishing a new Nuclear Regulatory Taskforce, reporting directly to the Prime Minister, to expedite regulatory processes

Rolls-Royce has been selected as a lead partner to develop SMRs alongside Great British Energy, with the government committing more than £2.5bn during the current Spending Review period. Yet even in a best-case scenario, SMRs are projected to supply only around 25% of future energy needs, before factoring the power requirements for artificial intelligence.

The more pressing challenge lies in demand growth, particularly from the digital economy. AI and associated infrastructure consumed an estimated 3.6 TWh of electricity in 2020. Under proposals set out by Labour leader Keir Starmer, this could rise to 72 TWh by 2030, a twentyfold increase amounting to a 30% rise in national electricity consumption. Without a commensurate increase in domestic generation, such ambitions could prove technologically and economically unsustainable.

In short, the impact of the failure of various Governments to implement a long term energy strategy is real and likely to result in a real choice. Higher Government expenditure in order to provide the infrastructure needed for the digital economy, or lower levels of investment and the UK being stuck in the digital slow lane.

Over to you, Kier Starmer.

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