The global events of the past two years have hit people’s spending hard, and nowhere is this more apparent than in the energy market. The reopening of the post-lockdown economy, compounded with restrictions and sanctions on oil and gas imports due to the war in Ukraine, have all amounted to one thing: higher bills.
According to research from the House of Commons, the energy price cap – the limit on the rates consumers pay per unit of gas and electricity – increased by 54 per cent in April, taking the estimated average annual bill for UK households from £1,300 to £2,250. The cap is speculated to increase by a further 30 to 50 per cent in October. By 2023, as many as 16 million people could be classed as living in poverty in the UK, according to analysis by the Resolution Foundation think tank.
As energy prices rise, the government is looking for ways to tackle soaring costs while honouring commitments on the climate. The British Energy Security Strategy, published in April, aims to build a “self-sufficient” energy system that reduces dependency on foreign fuel, invests in clean technology and improves the energy efficiency of buildings.
It lays out a ten-point plan of investment, including prioritising sourcing fossil fuels domestically from the North Sea. “Net zero is a smooth transition, not an immediate extinction, for oil and gas,” it states. The government plans to phase out Russian oil and coal by the end of 2022, and to stop imports of Russian liquefied natural gas (LNG) “as soon as possible”.
The strategy includes a major projected push for nuclear power, with an aim for it to generate a quarter of UK electricity by 2050, and a £2bn investment into nuclear plants this parliamentary year alone. The nuclear option continues to be controversial, with some saying it is safe, clean and reliable and others arguing that the associated waste disposal, cost and development times are problematic.
The government aims to have over half of renewable energy generation coming from wind by 2030, plus a fivefold increase in the use of solar power by 2035. Electrolysis – where electricity is used to split water into hydrogen and oxygen – will be used to double our low-carbon hydrogen production by 2030, alongside plans for better hydrogen storage and transport infrastructure.
Leaky homes are one of the biggest contributors to bill increases and global warming, with the UK having among the worst-insulated housing stock in Europe. The government has already committed to some energy efficiency measures, including cutting VAT for insulation and heat pumps (a sustainable replacement for gas boilers), £1.8bn towards retrofitting low-income households, and household grants of £5,000 towards installing heat pumps via the £450m Boiler Upgrade Scheme.
Business Secretary Kwasi Kwarteng tells Spotlight that the UK has “enormous potential” in terms of developing “home-grown, self-sufficient, clean energy” and that our landscape and technological prowess make us “well-positioned to achieve greater energy independence” through mechanisms such as wind, nuclear and hydrogen.
“It is [clear] that we cannot afford to be dependent on importing fossil fuels from abroad,” he says. “It’s expensive, polluting and leaves us vulnerable to volatile global markets or the whims of dictators like Vladimir Putin.”
“Forget Brexit – we are all interconnected in one gas market”
But energy experts question whether “independence” is the answer. Rob Gross, director at the UK Energy Research Centre (UKERC) and professor of energy policy and technology at Imperial College London, says it is crucial the UK works with other countries. “I think the principal goal should be having a resilient and secure supply of energy, rather than independence,” he says.
Trading with Europe is essential to ensuring the UK secures its supply of LNG, for instance, as the country looks to phase out Russian imports. He says it is “regrettable” that the UK was largely excluded by the European Union’s plan for affordable, secure and sustainable energy. Mainland Europe has more storage facilities, while the UK has import terminals needed to regasify the liquid.
“We are all interconnected and still in one gas market,” he says. “Forget Brexit. We won’t be able to end our reliance on gas soon. We don’t say we’re going to be food independent, or mobile phone independent.”
Many believe the government has focused on the wrong technologies. Euan Graham, senior researcher for clean economy at climate think tank E3G, believes the government’s fixation with nuclear is “misguided”. According to E3G’s research, nuclear plants take 13 years to develop and deploy, compared to eight for offshore wind, six for onshore wind, one for solar, and less than a year to retrofit homes. Given that time frame, nuclear will not reduce household bills for a decade, says Graham.
“Energy efficiency was left in the toolbox”
Investing in domestic fossil fuels also means consumers are still at the whims of global oil and gas prices. “The Energy Security Strategy was a chance to make the UK’s energy supply affordable and reliable for millions of households and businesses, and government didn’t take it,” Graham says. “The problem lies in our reliance on gas, and the exposure to volatile price swings that come with it,” he adds. “The solution is to stop using the stuff, and that would have required a massive step change in both energy efficiency, and renewables.”
Onshore wind, contentious among Tory backbenchers due to turbines being perceived as an “eyesore” in the countryside, is notably absent from the strategy. Graham says that government should have cut red tape around onshore wind planning regulations, which would have “unlocked a huge chunk of projects that are effectively stuck in limbo”.
A greater emphasis on making homes more energy-efficient would have also produced the “largest savings on bills in the fastest time frame”, says Graham. It could have been deployed in a targeted way to ensure vulnerable households benefitted first. “Energy efficiency is the best tool with which to repair our broken energy system and it was left in the toolbox,” he adds.
Alongside grants, government could do better to incentivise the public to reduce their own household bills, says UKERC’s Gross. UKERC is calling on the government to launch an energy efficiency campaign this summer to educate people about small changes they could make to their homes as winter approaches. While major retrofitting such as installing double glazing, heat pumps and loft insulation can be costly, “low-hanging fruit” such as regularly servicing boilers and avoiding heating rooms that are not in use can make a difference to costs.
Suppliers could also be encouraged to invest in efficiency. The Contracts for Difference (CfD) scheme offers renewable technology developers the chance to “bid” for a fixed, pre-agreed price for the electricity they produce. This model incentivises suppliers to invest in low-carbon technologies, while protecting them and consumers from the market’s volatile price swings. Similar measures could be introduced for energy efficiency systems such as heat pumps and insulation, says Gross.
“The gas we burn funds Putin’s war”
E3G has also suggested the government should introduce measures to increase the take-up of efficient household appliances, phase out gas boilers in new-build homes by 2023, launch a major training programme to upskill engineers in heat pump fitting, and introduce a lower stamp duty for energy-efficient homes.
Ultimately, the public needs to be included in the fight to tackle the climate crisis and rising bills. Eleni Stathopoulou, a lecturer in economics at the University of Sheffield, says the strategy “fails to be human-centric”, and lacks incentives for individuals.
“The link between energy use and bill reduction [needs to be made clear],” adds Gross. “A small fraction of the gas we burn is actually helping to fund Putin’s war. It’s about anything people can do to reduce it.”