The UK is ‘dangerously underprepared’ for future energy crisis

The ECC, a high-level group of experts including representatives from Energy UK, CBI, Citizens Advice and National Energy Action, was established to review the impacts of the energy crisis on households and businesses and make recommendations to better equip the country to withstand possible future energy crises. They found that:

• British households and businesses were hit harder than many other European countries because of high dependence on gas for heating and power generation.
• Household billpayers ‘paid the price’ for the slow pace of improving leaky and damp housing stock, delays to new-build efficiency standards, and missed opportunities to build more renewables like onshore wind, according to the report.
• Poorly targeted support schemes and the slow pace of improving home energy efficiency meant that the poorest households suffered, and pushed up the overall cost of the crisis for the UK, driving up national debt.
• The impact on some vulnerable households and businesses has been catastrophic’: nine in ten households cut back their energy use, the number of households in fuel poverty reached around 7.5 million, and GB households owe around £3.5 billion to energy companies.
• Almost one in ten firms (8%) reported ceasing operations for some or all their business and one in five (22%) said that they would draw on cash reserves in response to higher energy costs.
• The energy crisis drove the wider cost of living crisis and stifled economic growth.
• Too little progress has been made since the start of the energy crisis to reduce the UK’s reliance on gas by insulating homes and scaling up the installation of heat pumps.

This is not the first time the UK and other countries have been affected by a sustained energy price shock. The recent crisis is different, however. It affected gas prices rather than oil prices. Given the importance of gas for homes, businesses and electricity generation, the UK was particularly vulnerable to its impacts.” – Jim Watson, Director, UCL Institute of Sustainable Resources

Recommendations

It’s clear from the ECC report that the UK needs to accelerate its low-carbon transition to improve its resilience to another energy crisis. To do this they recommend that the UK:

• Develops a clear strategy for shifting away from fossil fuels, particularly gas.
• Increases public investment in home energy efficiency to improve millions of cold, damp, unhealthy homes.
• Introduces strengthened energy efficiency regulations for the private rented sector and implement the Future Homes Standard for better quality new builds.
• Accelerates rollout of electric heat pumps via the Clean Heat Market Mechanism and set out a plan for transitioning away from gas heating.
• Continues to accelerate progress towards clean power by scaling up diverse and flexible technology, being ambitious on renewables and improving grid infrastructure and storage capacity.
• Provides targeted and scale-up support for businesses and energy intensive industries to decarbonise.
• Pursues electricity market reform urgently.

This report provides a timely analysis of the immediate effects of the price crisis, and the responses by government, the regulator and the industry. Crucially, it also seeks to learn lessons from the past two years, and to recommend actions that would reduce the UK’s vulnerability in future.” – Jim Watson, Director, UCL Institute of Sustainable Resources

Future proofing

Additionally, the ECC made recommendations to ensure better handling of a future crisis:

• Improve targeting of support for vulnerable households, including data sharing and matching, and urgently preparing for the need for support rising this winter.
• Introduce separate, targeted and scaled-up support for energy intensive industries and other businesses.
• Review regulation to protect consumers from supplier failure.
• Develop an overarching plan to reduce the risk of future crises, including regular stress testing of the UK’s resilience to price shocks and disruption.

The long-term solution is to shift away from fossil fuels. To achieve this, the report emphasises the need to improve energy efficiency and invest more rapidly in non-fossil sources of energy. However, it is also important to manage the decline of fossil fuels in an equitable way – especially gas. A comprehensive plan is required to achieve this that covers all stages of the gas supply chain: from offshore production in the North Sea to the use of appliances in homes” – Jim Watson, Director, UCL Institute of Sustainable Resources

Source: ULC Institute