What can we do to secure a brighter energy future?
With the energy price cap rising today putting many families under severe financial strain, what can be done going forward to ensure such a crisis may be avoided in future?
No, it's not an April fool, the rise in energy prices millions have been dreading for months has finally come into force today. The energy price cap rises by 54 per cent, increasing costs by around £700 to nearly £2000 per year for a typical household.
Claire Moriarty, Chief Executive of Citizens Advice, has warned that people "already struggling are going to find themselves in a really dire situation". The energy price rise comes as National Insurance increases to fund the NHS and Social Care levy, and council tax rises come into force on top, placing a huge financial burden on families.
Gas prices were soaring in price well before the crisis in Ukraine (which has undoubtedly had an impact), leading to a number of energy companies going bust back in October and November, most notably Bulb with around 1.7 million customers. This was due to a number of factors, including a surge in demand for gas from China as it emerged from the pandemic, and Russian firms, in particular Gazprom, refusing to increase exports beyond contractual agreements. After a long winter last year depleted supplies, many countries were left struggling to restock.
In the weeks and months since the announcement, politicians on both sides of the house have traded arguments as to the causes of the rise. The Conservatives insist that the issues that have led to the energy cap rise are beyond their control, citing global gas prices. Labour argue the Government have not considered enough measures to offset the rise, such as their proposal of a windfall tax on North Sea oil and gas companies to bring in extra revenue.
Both sides are, to a certain extent, correct. However, Rishi Sunak saying "I want to do what we can to ameliorate some of that, but I'm also honest with people that we can't ameliorate all of it, sadly", bears somewhat of a resemblance to the famous Yes, Minister 'four stage strategy'. There have been steps that should have been taken in recent years by a number of governments that now must be fast-tracked.
Long-term secure funding for energy efficiency must be introduced. There are still too many homes across the UK that suffer from poor energy efficiency and more must be done to help families bring their homes up to scratch, especially those in council-owned homes.
The current push towards heat pumps must be reconsidered, at least for the short term. They are currently far too expensive for most households to buy, especially now that budgets are being squeezed, and they are also expensive to run. It makes no sense to continue advocating such an option.
To bring costs down, the Government must, for the time being, continue to look to the North Sea for oil and gas supplies. This will incur the wrath of green campaigners, but right now families on the brink of absolute poverty need to find some security, and the plentiful supplies of our coast must be brought into play. Likewise, the supplies of shale gas must be revisited. The news yesterday that Cuadrilla will not have to seal up its exploratory wells in Lancashire by the end of June is welcome. More time and effort needs to be devoted to this potential source, and nimbyist campaigners must not be allowed to get in the way of a fair evaluation of shale potential to add to our energy supplies.
While we must seek to expand our 'homegrown' supplies of gas, it will mean nothing if we do not expand our gas storage infrastructure. As mentioned earlier, part of the problem has been stored supplies running low. The UK's gas storage infrastructure in September last year was just five per cent of Italy's storage capacity, and well below that of others such as France and Germany. Boosting storage is crucial so that the UK energy network avoids being severely impacted by global supply issues. What's more, should we end up with a surplus, we can look to supply others with any excess gas we have left over, recouping some cost.
These measures, unfortunately, are all for the future, and will not make the slightest difference to households and their now greater bills. It is disastrous that it took the largest cost of living crisis in decades to kickstart discussion on energy independence. Decades of government failure, both from Labour and the Conservatives, to secure greater independence are now costing us dearly.
