The cost of living crisis has probably been the main issue on most people’s minds recently. Energy bills are a significant element of higher household bills and are going to rise even further. Following the 54 per cent rise in Ofgem’s price cap at the beginning of April, the unprecedented rise in fossil fuel prices, linked to the war in Ukraine, is now starting to feed through to consumers. The cap is predicted to increase by a further 32 per cent in October, meaning that energy prices will have almost doubled in a year.
As usual, the poorest are hit hardest, with many already experiencing ‘fuel poverty’. Government help, providing limited support through council tax and energy bills, is targeted at the people most likely to vote for them: in this case homeowners. Incredibly, people using pre-payment meters (who often include the most vulnerable) are facing even greater price increases than default tariff customers.
A golden opportunity?
In April, the government announced a new British energy security strategy. This was a golden opportunity to focus on directing investment urgently, first of all into energy efficiency, to reduce demand (and therefore consumers’ bills), and secondly into the cheapest and quickest renewable technologies available. Not only would this be compatible with the government’s avowed ‘net zero by 2050’ objective, but it could also deliver affordable, green energy in Britain in the short term.
However, respected commentators were less than enthusiastic, including the New Scientist: “Won’t provide enough energy or security”; the Economist: “Timid and unrealistic”; the Financial Times: “Cowardly and inconsistent”.
These are the main shortcomings of the strategy:
Nothing new on energy efficiency
Many of the UK’s homes are poorly insulated and over-reliant on fossil fuels (typically gas) for heating. Despite widespread calls to spend more money on improving insulation, from the Climate Change Committee to the protest group Insulate Britain, rumour has it that Rishi Sunak’s (sorry, Her Majesty’s) Treasury blocked additional spending on energy efficiency. In fact, the scale of what is needed on energy efficiency is massive and a huge challenge, as a report by the Office of Budget Responsibility emphasised.
Expensive, slow nuclear and offshore wind technologies
A new energy security strategy was expected to include investment in a new generation of nuclear power stations. Half of the country’s current nuclear capacity is due to be retired by 2025. However, this technology is expensive and slow to deliver and also brings with it with a legacy of toxic waste and the threat of catastrophic accidents or hostile attack, of which the invasion of Ukraine has been a sobering reminder.
Nevertheless, new nuclear suits Boris Johnson’s bullish style and the strategy aims to have up to eight more nuclear reactors by 2050. One further new plant is to be financed before the next general election, thought likely to be the new Sizewell C in Suffolk. However, there is scepticism about the likelihood of this level of commitment to nuclear in the long term. Under the ‘regulated asset base’ model that the government now proposes, many of the costs would be reflected in consumers’ bills years before they begin operating, exacerbating the problem of high energy costs.
As for offshore wind, it offers important ongoing potential for expansion of an intermittent renewable energy source, but the challenges of significantly increasing capacity will take several years to deliver.
Onshore wind and solar power are neglected
In the light of the urgency of the gas price crisis, these two renewable sources would be cheaper and quicker to deliver than nuclear and offshore wind, as capacity could be expanded significantly in a matter of months. There is a view amongst some Conservatives that their voters don’t want onshore wind turbines in their localities. However, the government’s own surveys show that the majority (around 80%) support such renewable technologies.
The strategy fails to set a firm target for solar power, another renewable source that can be built quickly and relatively cheaply, saying merely that it would look to increase the UK’s capacity “up to five times by 2035.”
Further exploitation of North Sea oil and gas reserves
The strategy affirms: “our commitment to a strong and evolving North Sea industry” and also leaves the door open to ‘fracking’. Despite protestations to the contrary by the Johnson government, further exploitation of new fossil fuel sources is inconsistent with the legal commitment to ‘net zero by 2050’ made by Theresa May in 2019 and the UK’s commitments at the United Nations COP 26 conference held in Glasgow in November 2021.
Support for blue and green hydrogen technology
The strategy supports blue hydrogen technology, with carbon capture and storage (CCS) including a target to “double our UK ambition for hydrogen production to up to 10GW by 2030”, with at least half of this from electrolytic ‘green hydrogen’(made by passing electricity through water to separate out the hydrogen and oxygen). This seems relatively unambitious when one considers the potential to use existing natural gas infrastructure in the North Sea to store and transport off-shore energy to shore more efficiently, as hydrogen (electrolysed at sea) rather than as electricity.
A missed opportunity
To sum up, the government’s new energy security strategy appears to have been conceived with no consideration of the urgent need to address security of both price and supply in relation to the high costs now faced by consumers and the UK’s dependence on energy imports.
Outside the EU’s internal energy market, Brexit Britain may have to compete with much larger buyers on the world markets for up to 35 per cent of its overall energy supplies, including a significant proportion of its gas supplies. As Professor Michael Grubb of University College London pointed out recently: “That won’t be pretty.”