Editorial: How the Tories have fuelled Britain’s energy crisis
The Spectator, 25 September 2021The Prime Minister has high hopes for the COP26 summit but he should be prepared for other countries to see, in his energy policy, an example of what not to do.
Britain is caught in an energy crisis of the government’s own making. It is true that gas prices have spiked all over the world — but Britain is suffering more than most. Energy suppliers are going out of business, thanks to the government’s price cap. Even fertiliser companies are going bust, with serious knock-on effects for the food industry: the British Meat Processors Association says shortages could hit within a fortnight.
The trigger for this crisis has been the sudden surge in demand for gas as the global economy recovers from the Covid lockdowns. Gas prices have doubled in the United States, for example. In Britain, however, prices are five times higher. Why? Because America exploited fracking technology and capitalised on its huge inland gas reserves. Britain passed up the fracking opportunity, in spite of vast reserves found in Lancashire and Yorkshire. We are living with the consequences.
While the UK government is right to phase out the burning of coal (easily the dirtiest form of energy, emitting around twice as much carbon dioxide as gas plants), it is also running down our gas infrastructure without providing a viable alternative. In 2017, the Rough storage facility off the Yorkshire coast, which accounted for two-thirds of our gas capacity, was closed and not replaced.
Every country has gas reserves in the event of widespread shortages. France has 14 weeks’ worth, Germany has eight weeks, Italy has 11 weeks, while Britain has just four days. That is virtually no buffer at all when a supply crisis strikes.
There is plenty that can go wrong with gas: a fire knocked out a major power cable linking Britain with France last week, for example. Britain’s reserve hope now lies in shipments of liquified shale gas produced abroad — supplies of which are currently being diverted to Asia, where demand is strongest.
Renewables can produce impressive quantities of energy. Yet Britain has created a huge wind and solar sector without overcoming the obvious problem: how to store the energy generated on sunny and windy days so it can be used on still and overcast ones. It is unfortunate that the surge in global gas prices has coincided with a period of light winds over Britain, but that should have been anticipated. Many observers outside government saw the problem coming.
Today Britain presents itself as a great example to other nations when it comes to handling energy policy and tackling climate change. Indeed, Boris Johnson has spent this week in New York asking why so few countries have followed Britain in making a legally binding commitment to hit net zero carbon emissions by 2050. The polite answer is that countries also have a duty to secure affordable energy for their citizens. When the COP26 summit convenes in Glasgow in a few weeks’ time, Britain could be in the middle of an energy crisis. The UK government might have to bail out almost-bankrupt fossil-fuel companies in a desperate attempt to keep the lights on. That would hardly be a great advertisement to the world.
For years it has suited ministers to accuse energy companies of overcharging their customers because it has helped divert attention from another reason for rising bills: green energy subsidies and other social levies, which, according to Ofgem, account for 25p in every £1 charged on domestic electricity bills. And as is now clear, with several of the smaller energy companies going bust or on the point of doing so, it has long been a cut-throat market where challenger companies have tried to compete by insuring themselves against price spikes.
Like the banks who lent long and borrowed short, the folly of this has come to a head. But the problem has been hugely exacerbated by the energy price cap which, while popular with the public, has prevented energy companies from raising prices in response to a sharp increase in wholesale prices. The government is doing with failing energy companies what it did with failing banks: bailing them out with taxpayers’ money, thereby ensuring that they will repeat their reckless behaviour.
Much as the government would love to be able to deliver secure energy supplies and low prices in tandem with zero carbon emissions, the technology simply does not yet exist to make it possible. The Tories, ever keen to capture the green zeitgeist, had the chance to establish energy security — or diversity of supply. They did neither, and went all-out for decarbonisation instead. We are now seeing the consequences.
Energy security and economic growth should be the first priorities. As things stand, they are treated as an afterthought. We have caught a glimpse of the results this week. The Prime Minister has high hopes for the COP26 summit but he should be prepared for other countries to see, in his energy policy, an example of what not to do.
The trigger for this crisis has been the sudden surge in demand for gas as the global economy recovers from the Covid lockdowns. Gas prices have doubled in the United States, for example. In Britain, however, prices are five times higher. Why? Because America exploited fracking technology and capitalised on its huge inland gas reserves. Britain passed up the fracking opportunity, in spite of vast reserves found in Lancashire and Yorkshire. We are living with the consequences.
While the UK government is right to phase out the burning of coal (easily the dirtiest form of energy, emitting around twice as much carbon dioxide as gas plants), it is also running down our gas infrastructure without providing a viable alternative. In 2017, the Rough storage facility off the Yorkshire coast, which accounted for two-thirds of our gas capacity, was closed and not replaced.
Every country has gas reserves in the event of widespread shortages. France has 14 weeks’ worth, Germany has eight weeks, Italy has 11 weeks, while Britain has just four days. That is virtually no buffer at all when a supply crisis strikes.
There is plenty that can go wrong with gas: a fire knocked out a major power cable linking Britain with France last week, for example. Britain’s reserve hope now lies in shipments of liquified shale gas produced abroad — supplies of which are currently being diverted to Asia, where demand is strongest.
Renewables can produce impressive quantities of energy. Yet Britain has created a huge wind and solar sector without overcoming the obvious problem: how to store the energy generated on sunny and windy days so it can be used on still and overcast ones. It is unfortunate that the surge in global gas prices has coincided with a period of light winds over Britain, but that should have been anticipated. Many observers outside government saw the problem coming.
Today Britain presents itself as a great example to other nations when it comes to handling energy policy and tackling climate change. Indeed, Boris Johnson has spent this week in New York asking why so few countries have followed Britain in making a legally binding commitment to hit net zero carbon emissions by 2050. The polite answer is that countries also have a duty to secure affordable energy for their citizens. When the COP26 summit convenes in Glasgow in a few weeks’ time, Britain could be in the middle of an energy crisis. The UK government might have to bail out almost-bankrupt fossil-fuel companies in a desperate attempt to keep the lights on. That would hardly be a great advertisement to the world.
For years it has suited ministers to accuse energy companies of overcharging their customers because it has helped divert attention from another reason for rising bills: green energy subsidies and other social levies, which, according to Ofgem, account for 25p in every £1 charged on domestic electricity bills. And as is now clear, with several of the smaller energy companies going bust or on the point of doing so, it has long been a cut-throat market where challenger companies have tried to compete by insuring themselves against price spikes.
Like the banks who lent long and borrowed short, the folly of this has come to a head. But the problem has been hugely exacerbated by the energy price cap which, while popular with the public, has prevented energy companies from raising prices in response to a sharp increase in wholesale prices. The government is doing with failing energy companies what it did with failing banks: bailing them out with taxpayers’ money, thereby ensuring that they will repeat their reckless behaviour.
Much as the government would love to be able to deliver secure energy supplies and low prices in tandem with zero carbon emissions, the technology simply does not yet exist to make it possible. The Tories, ever keen to capture the green zeitgeist, had the chance to establish energy security — or diversity of supply. They did neither, and went all-out for decarbonisation instead. We are now seeing the consequences.
Energy security and economic growth should be the first priorities. As things stand, they are treated as an afterthought. We have caught a glimpse of the results this week. The Prime Minister has high hopes for the COP26 summit but he should be prepared for other countries to see, in his energy policy, an example of what not to do.
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