Demand for and the cost of energy is on the rise across much of the world. As a country that imports more than half of its gas, the UK is sensitive to fluctuations in both price and demand. It’s crucial, therefore. that the government adopts a new approach to energy to ensure we can all still afford to heat our homes and that we have a secure supply.
A large proportion of our gas comes from Norway, and we also ship liquid natural gas from Qatar, though, China has been buying up much of this having experienced a very cold winter, and this is pushing up prices. While the UK only imports less than 5% of its gas from Russia, elsewhere in Europe that figure is much higher. Russia has been accused of restricting supplies to Europe for political reasons and though this does not directly impact supply to the UK significantly, it does increase prices on the gas market overall.
The cold winter is one reason for the increase in demand that has driven up prices. Stocks that were depleted over winter would typically be restored in summer, but due to Covid-19 lockdowns, productivity slowed, and this was not achieved. Other problems included low wind speeds impacting renewable energy supplies, and a fire that shut down a key interconnector moving gas to and from France. This perfect storm has resulted in soaring prices.
These rising prices on the wholesale gas market have folded several smaller energy companies which have not been able to buy sufficient supply at a cost they can pass on to customers honouring price deals made with them - and within the government cap. When a supplier exits the market, their customers are passed on to another supplier. The adopting supplier however will not have forecast for the additional customers, and therefore will not have bought sufficient supplies ahead at the cheaper price. So, something must change and quickly.
To date two things have gone wrong – first a lack of focus on the importance of ensuring we can meet the majority of our own energy needs domestically, and second a poor fiscal policy on energy. The price cap introduced to manage the cost of energy to the consumer– effectively has done the reverse. For the larger companies taking on customers from smaller rivals to survive, the cap has to go up – substantially! This will feed into higher energy bills. Environmental taxes have further exacerbated the price of energy to the consumer. That also has to be urgently addressed.
I recently signed a letter urging the Prime Minister to scrap VAT and environment levies on energy bills. These levies typically make up around 25% of our energy bill. Having left the EU, we have the power to ease this problem and must do so - as the Prime Minister promised some years ago! This call for change is gaining momentum and I will most certainly continue to press the case.
Green is good but we have to transition to green energy sensibly recognising green can’t do it all - and until technology changes that, we must invest more in nuclear and other carbon-based energy, at the clean end of the scale. We also have to address the many related infrastructure problems. The National Grid will be expected to manage the distribution of substantially more energy as we all move predominantly to electricity. Only recently the grid failed in the South West. I am far from convinced the National Grid has adequately stress tested its assumptions. Right now, I need to hear a lot more about how exactly the grid will change to accommodate this huge new demand and will continue to challenge them to properly address this issue.
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