In the 1990s, the UK made a “dash for gas”. In recent years, it has leaned on the fuel to ease the phase out of an even more polluting fossil fuel, coal. That makes the UK heavily reliant on gas for energy, with 86 per cent of homes using it for heating and more than a third of electricity supplies coming from gas power plants.
The main reason for the current crisis is a shortage of gas supplies, due in part to outages in production in Norway and elsewhere, and demand from Asia. It is also, to a much lesser degree, due to low output from wind power and a fire last week leaving a UK-France power link offline. Prices and carbon emissions are up, with ageing coal and mothballed gas power stations firing up again. Wholesale gas prices are up 176 per cent since the start of the year, and power prices in the past month are up 266 per cent on the average this year.
The UK government is reportedly considering offering loans to energy companies that are struggling to cope with the higher wholesale prices, due to both the government’s cap on how much firms can charge consumers and a lack of financial hedging against the increase.
It didn’t have to be this way. Energy crises like these are a cyclical feature of being at the mercy of the volatile nature of fossil fuel prices, subject to global and geopolitical factors beyond the control of any one nation. Countries that have prioritised domestic low-carbon energy are much more insulated to such shocks.
The UK should know this: its last crisis was only in 2018, when the situation wasn’t as dire as today, but wholesale gas prices were surging and many energy suppliers were going bust, leaving society to pick up the bill.
Gas prices will be the main problem this winter, but misguided solutions have been thrust to the fore. Today’s Daily Telegraph proposes fracking to boost domestic gas production. But companies spent years failing to deliver shale gas under UK regulations. Elsewhere, some blame the energy price cap. Others are calling for levies supporting renewables to be shifted off electricity bills, which people would still need to pay through taxation.
The UK’s nuclear power trade body says nuclear is the answer. Yet a new nuclear plant would take at least a decade to build, and the financing model being considered would leave energy bill payers shouldering the cost if construction goes over budget and schedule.
In rare unity, the UK government and its main political opposition seem to realise the only real long-term fix is to cut the UK’s reliance on gas by backing renewables and low-carbon alternatives to gas boilers, such as heat pumps. Energy minister Kwasi Kwarteng, who met energy firms this morning, said the crisis shows the importance of the UK’s plan “to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels”. Ed Miliband of the Labour party said the situation was a result of failure to invest enough in “zero carbon energy supplies” and energy efficiency.
The UK has a good track record of supporting renewables and bringing down their cost. More subsidies for wind and solar power will be awarded in auctions starting in December. The country’s scorecard on energy efficiency is worse. A series of schemes to insulate homes or otherwise improve their energy efficiency have been botched, the most recent being the Green Homes Grant, which was axed having improved only a tenth of the homes it was designed to.
A chance for redemption may come soon. The government is due to publish a new UK strategy on heat and buildings, which could help prevent the current energy crisis from being repeated if it provides bold policies on efficiency and low-carbon heating.
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