The UK does not have an energy problem. It has a freedom problem.
By Elias Sanchez
The United Kingdom’s economic deceleration is conventionally attributed to fiscal consolidation, anaemic productivity growth, and the supply-side dislocations that followed Russia’s invasion of Ukraine. These are real constraints. But treating them as primary causes rather than downstream symptoms is a misdiagnosis — and an increasingly costly one.
The deeper pathology is regulatory density: an accumulated architecture of formal constraints that suppresses entrepreneurial discovery, crowds out new entrants, and reduces the adaptive capacity of institutions. It is this environment, not fiscal tightness alone, that arrests the spontaneous, bottom-up processes of coordination upon which market economies depend for long-run resilience.
The human cost of this misdiagnosis is not abstract. In 2024, approximately 12.2 million households in England were spending more than 10% of their income on domestic energy, according to data from the End Fuel Poverty Coalition and the Department for Energy Security and Net Zero. Fuel taxation and green levies embedded in energy bills function as a regressive flat charge — falling proportionally hardest on those least able to absorb them. The regulatory architecture that produced those costs was not designed around the subjective circumstances of the poorest households. It was designed around policy targets, statistical projections, and the administrative convenience of large, established suppliers.
The same logic crushes new entrants from the other end. As OVO Energy disclosed in testimony to the Competition and Markets Authority, crossing the threshold of 250,000 customers triggers obligations under the Energy Companies Obligation worth millions of pounds — not merely in direct compliance costs, but in the specialist staff and systems required to meet them. The result is a regulatory structure that penalises growth, entrenches incumbents, and systematically destroys the incentive for entrepreneurial discovery precisely at the moment it becomes viable.
These are not accidental policy failures. They are the predictable consequences of a planning logic that substitutes the regulator’s statistical model of reality for the dispersed, living judgment of individuals. Regulation of this kind does not merely produce bad outcomes — it commits a prior offence. By designing policy around aggregate patterns, it treats human beings not as creative, self-determining agents but as variables to be managed. It presumes, in effect, that human capacity is best expressed within a constrained and coercively assigned set of actions. This is not governance. It is — in a tradition of economic thought running from Friedrich Hayek through to more recent scholars of entrepreneurship — a form of epistemic violence: a systematic assault on the spontaneous, inalienable capacity of individuals to discover, combine, and act on knowledge that no central authority can fully observe or anticipate.
Deregulation, in this context, is not an ideological preference for minimal government. It is a functional and moral imperative.
- The Institutional Failure of Ofgem — and What Should Replace It
The case for deregulating the UK energy market is not, at its core, a case against regulation in the abstract. It is a case against a specific institutional logic — one that Ofgem embodies completely.
Ofgem is not staffed by incompetent people. The problem is structural. As a public body whose mandate is shaped by political objectives determined in Westminster — net zero targets, price cap mechanisms, consumer protection metrics — it is constitutionally incapable of enabling the kind of entrepreneurial discovery the energy market requires. Its compliance architecture, as the OVO case demonstrated, does not create a level playing field. It creates a cliff edge that punishes growth, entrenches incumbents, and eliminates the middle tier of firms that would otherwise be scaling alternatives to oil and gas. Reforming Ofgem’s threshold rules would change the clothes without changing the body. The institutional DNA — optimising for political goals rather than entrepreneurial freedom — would remain intact.
The question, then, is not whether to dismantle this architecture, but how to do so without exposing the most vulnerable households to the transitional costs that inevitably accompany structural reform. Argentina offers an instructive, if imperfect, precedent. When Javier Milei established the Ministry of Deregulation and State Transformation under Federico Sturzenegger, he created an institution whose explicit mandate was its own progressive redundancy — abolishing regulations at a rate that, according to Milei’s own account of the programme’s pace, reached 3.5 per day at its height. One early result was rent decontrol, which according to analysis published by the Library of Economics and Liberty caused the supply of available apartments to nearly triple, with real prices falling by as much as 40%. Entrepreneurial discovery, once unshackled, moved faster than any quota target could have anticipated.
The UK is not Argentina. There is no hyperinflation to stabilise, no currency controls to lift, no parallel exchange rate to close. The macroeconomic starting conditions are different in degree, if not entirely in kind. But the institutional logic is transferable. What the UK requires is a body modelled not on Ofgem’s regulatory mission but on Sturzenegger’s deregulatory one — centralised initially, to manage the macroeconomic stabilisation that precedes liberalisation, but with decentralisation written into its constitutional mandate. Authority should devolve progressively to local and community-level bodies, so that the administrative logic never scales into the dense regulatory architecture it was created to dismantle.
Ofgem’s supply-side functions — its oversight of production, entry thresholds, and compliance obligations on energy suppliers — should be the first to go. Its consumer protection role, particularly for low-income households still exposed to regressive energy pricing, should be ring-fenced temporarily as a transitional floor. The precise institutional design of that transition is a matter for further analysis. What is not a matter for further analysis is the direction of travel: a deregulation body that measures its own success by its own diminishment is the only institutional form consistent with the argument being made here.
- The Wrong Question
The entire British policy debate about energy has been asking the wrong question. From net zero frameworks to hydrogen strategies, from offshore wind targets to nuclear commissioning timelines, the political class has proceeded on a single, unexamined assumption: that the state can know, in advance, which energy technology will define the future, and that the function of policy is to back that technology with subsidies, mandates, and regulatory architecture. This assumption is not merely inefficient. It is epistemically presumptuous — and a tradition of economic thought stretching across most of the twentieth century has explained precisely why.
The core insight — developed by Friedrich Hayek and later extended by economists working in the same tradition — is that knowledge in a society is not concentrated in any single mind or institution. It is dispersed, tacit, and irreducibly personal. No central authority can aggregate it without fatal loss. From this follows a further argument, developed by Israel Kirzner (the economist who first formalised the theory of entrepreneurial alertness): the entrepreneur is not a planner but a discoverer, someone who notices opportunities that no model predicted and no committee commissioned. Jesús Huerta de Soto, the Spanish economist whose 2010 work Socialism, Economic Calculation and Entrepreneurship radicalised these insights, grounds entrepreneurship not merely in market function but in human subjectivity itself — in the inalienable creative capacity of individuals to combine and recombine ideas in ways that formal systems cannot anticipate, replicate, or substitute.
Whether the energy technology that liberates the UK from oil dependency will be lithium, tidal, nuclear, solar, or something no government white paper has yet named — we cannot know. That unknowability is not a policy problem to be solved. It is the very condition that makes entrepreneurial discovery possible. Every formal framework that picks a winner — every subsidy architecture, every regulatory mandate, every net zero target backed by compliance obligations — does not accelerate that discovery. It forecloses it. It substitutes the state’s necessarily limited model of reality for the anarchic, iterative, recombinative creativity of human minds operating outside the parameters of formal legibility.
This is the indictment. Westminster has not merely made inefficient policy choices. It has, through the accumulated weight of regulatory density, committed a sustained act of epistemic presumption — substituting its own patterns for the spontaneous order that only free human subjectivity can generate. The cost is not measured only in GDP points or productivity gaps. It is measured in the energy firms that never scaled, the technologies that were never discovered, the entrepreneurs who were regulated into stillness before their ideas could compound into something transformative. It is measured in the 12.2 million households — identified by the End Fuel Poverty Coalition and confirmed by the Department for Energy Security and Net Zero — spending more than a tenth of their income keeping the lights on: not because energy is inherently scarce, but because the regulatory architecture has made it so.
The urgency is real. Every year this architecture remains intact is another year of suppressed discovery, compounding dependency, and preventable poverty. The transitional costs of reform are real too — Argentina’s experience makes that plain. But the transitional costs of inaction are invisible only because they are diffuse, chronic, and fall most heavily on those with the least political voice.
Robert Nozick — the philosopher who argued that freedom inevitably disrupts any pattern a state attempts to impose — wrote that freedom upsets patterns. It does. And that is precisely the point. The pattern Westminster has imposed on the UK energy market — and on the human subjectivity that should be its most productive force — is not a feature of good governance. It is the problem. Deregulate that freedom, and what emerges cannot be predicted. But that unpredictability is not chaos. It is the precondition for every discovery that has ever mattered.
