The Energy Crisis Commission (ECC) has found that the UK needs to accelerate its low-carbon transition to improve its resilience to another energy crisis.
Having formed in August this year, the ECC, a high-level group of experts including the Rt Hon David Laws, chair of Energy UK; and Louise Hellem, chief economist at Confederation of British Industry (CBI); gathered evidence over summer from across the UK.
The ECC’s report finds that the UK was worst hit in Europe during the energy crisis that began in August 2021. The energy crisis, exacerbated in February 2022 by Russia’s invasion of Ukraine, saw nearly 30 suppliers collapse between September 2021 and July 2022, leaving 3.2 million people without electricity.
According to the commission, due to the nation’s high dependence on gas for power generation and home heating, the UK was particularly exposed to supply disruptions and price spikes on international markets, the impact of which was felt most significantly by households and businesses.
In 2022, the Energy and Climate Intelligence Unit (ECIU) forecast that the wholesale gas crisis would add £4,400 to household energy bills by 2024.
The commission’s overarching conclusion is that “it did not have to be this way”. It found that years of underinvestment in demand reduction measures like insulating homes and clean energy technologies, including power generation, storage and modernising the grid, alongside a lack of crisis planning left the UK “critically vulnerable”.
UK is underprepared for a future energy crisis
Great Britain was underprepared for a challenge to its energy security and without decisive, urgent action and investment the UK remains “dangerously underprepared” for a future crisis.
As has been widely acknowledged, the transition to net zero is critical in improving the UK’s energy security; domestic supplies of oil and gas will continue to decrease, having little impact on internationally-dictated wholesale prices, meaning that other domestic energy sources must be incorporated.
In January 2023, the ECIU found that if the UK had transitioned fully away from fossil fuels to renewable technologies it could have reduced the cost of energy bills in 2022 by around £1,750.
The ECC makes a series of recommendations to improve the UK’s ability to cope with a future energy crisis, which commission member Dhara Vyas, deputy chief executive of Energy UK, called “not just timely, but essential”.
To lessen the impact of a future crisis the commission suggests improving data sharing between the government, industry and charities to enable targeted help for those most in need.
The government should provide a clear strategy for shifting away from fossil fuels across the whole economy, focusing on the delivery of the low carbon transition including: cross-departmental analysis of the skills and supply chains required to shift from fossil fuels; the planning system; and managing the gas and electricity grids.
Like the Labour government, the commission acknowledges that oil and gas will play a role, albeit declining, for years to come, but it states the transition should be managed to enable workers to reskill for new industries.
Notably, given the recent investment the government made, the commission writes that although carbon capture and storage (CCS) could be an economic opportunity for the UK, it should not rely on CCS for limiting emissions and the priority should be shifting away from fossil fuels.
It further recommends that the government continue its mission to accelerate progress towards clean power and be ambitious on renewables and improving grid infrastructure.
Incentivise decarbonisation and demand flexibility
As well as continuing the reforms of planning regulations and accelerating grid improvements, the government should reform tax incentives to stimulate businesses to invest in decarbonising their assets. The report considers the Contracts for Difference (CfD) scheme to be the “gold standard”, suggesting only minor changes so projects that can be delivered in the shorter term can be awarded.
The government should further “urgently” pursue market reform, the report suggests. This should accelerate deployment of low carbon power to reduce the proportion of time that unabated gas is setting the electricity price, rebalance policy costs on bills and incentivise flexibility.
Another recommendation is that the UK reduce demand via home energy efficiency through long term, stable policy. One area of focus would be the introduction of stronger energy efficiency regulations for the private rented sector and implementation of the much-anticipated Future Homes Standard.
The publication of the report comes as the Association for Renewable Energy and Clean Technology (REA) reflects on the Labour government’s first 100 days in power, finding that “the government’s early announcements align with several of our recommendations, particularly around grid infrastructure and planning reforms”.