ourEconomy: Opinion

The UK’s inaction is to blame for the spiralling energy crisis – not Russia

Rising energy prices will hit the most vulnerable unless the government takes action to end reliance on gas and build for a sustainable future

Alex Chapman
8 March 2022, 3.21pm
A drilling rig in Lancashire
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Mark Waugh / Alamy Stock Photo

Europe finds itself in a bind; horrified by Russia’s action in Ukraine, yet, at least in part, funding Moscow’s war chest through the billions spent on Russian gas imports.

As a consumer in the European gas market, the UK plays a part in driving up the region’s gas prices. And with Moscow supplying 40% of Europe’s gas, higher gas prices increase the value of Russian exports, ultimately delivering higher returns to the Russian National Wealth Fund.

So, while direct imports of Russian gas are low in the UK, in the short term at least, UK consumers will not be able to avoid inflated gas prices.

Worrying forecasts suggest heating bills could see a further rise to £2,500-£3,000 per year in six months’ time, as the impact of the conflict in Ukraine hits the UK price cap, a figure set by energy regulator Ofgem in a bid to limit costs to consumers. This reflects a government failure resulting from more than a decade of inadequate action to ‘decarbonise’ UK homes.

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So far, the UK government’s response to the energy crisis has been inconsistent. Boris Johnson was recently reported as being sympathetic to the calls for increased domestic gas production, but Kwasi Kwarteng, secretary of state for business, energy and industrial strategy, appeared to shoot down supporters of fracking. A restart to shale gas exploration in the UK has also been advocated by the small but increasingly loud group of Conservative MPs and peers that form the Net Zero Scrutiny Group, which argues the government should ditch green levies and drill for more fossil fuels to lower energy bills.

The government’s division over preventing climate breakdown reaffirms the need to move away from gas, which has been apparent for decades. Yet the policies of this government, which has been in power since 2010, have delivered virtually no reduction in gas consumption whatsoever. Consumption of gas, both for domestic heating and electricity generation, is higher today than it was eight years ago.

In the domestic sector, delivery of energy efficiency measures to reduce domestic gas use through the Energy Company Obligation (ECO) has fallen to a fraction of its former level. Indeed, so low has the rate of home energy efficiency improvement fallen, that the gains achieved are outweighed by new demand created by the 200,000 new homes that are built every year. Most of these are built with a new gas boiler installed, though there is hope that this will soon change.

Existing policy will not scale up energy efficiency investment at anywhere near the pace required, neither to address climate breakdown, nor to tackle the hegemony of the fossil fuel oligarchs. As a result, the New Economics Foundation (NEF) has called for a Great Homes Upgrade, and set out in significant detail how this government could build out of the pandemic with a mass home retrofit programme.

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The NEF estimates that 19 million homes could be retrofitted by 2030 with basic insulation measures, ensuring the UK can fully end its reliance on Russia by cutting gas demand. Coupled with measures to electrify heating through technologies such as heat pumps, analysis by the Climate Change Committee, an independent statutory body, shows that the residential building sector, by itself, can save the equivalent of Russian imports in energy in under four years.

Recent studies have shown that heat pump technology is suitable for shifting “all housing types” off gas, but its achilles heel has previously been the relatively higher cost of the electricity, which powers the pump, in relation to gas. Now, however, the costs of solar and offshore wind are outperforming gas, and costs will continue to fall as renewable technologies scale up. Little stands between us and a mass home upgrade, or ‘de-gassing’, of the UK economy, barring time and political will.

Time, however, is an issue. Even a wartime effort to upgrade the UK’s homes would take months to roll out, particularly as the government has so far failed to inject sufficient momentum into the required upskilling of the workforce, despite the thousands of new jobs which await. But time is a problem which applies equally to the proposal that fracking could reduce our current vulnerability in the gas market, which has been advocated by the Net Zero Scrutiny Group.

The government must now act aggressively to shield the UK’s most vulnerable communities from the cost-of-heating crisis

New extraction would take years to scale up to any meaningful level, even according to the industry’s own estimates which exclude the impact of local community resistance to such proposals. An even bigger obstacle is the fact that the low levels of production achievable from new UK gas exploration would have a limited impact on the size of our gas imports, and an inconsequential impact on prices. The International Energy Agency instead suggests our best short-term options involve addressing inefficiencies in Europe’s current gas networks, scaling up infrastructure for the import of gas from other nations, and behavioural changes, with better-off households slightly reducing the temperature of their homes.

The government must now act aggressively to shield the UK’s most vulnerable communities from the cost-of-heating crisis. Modelling shows that the government’s current financial support is both inadequate and poorly targeted, likely leaving millions at risk of poverty. The NEF’s analysis suggests the most effective route to shielding UK communities from the gas crisis is not the government’s council tax rebate, but through a rethink of our approach to the social safety net. Now is the time not only to mobilise a wartime effort to deliver a Great Homes Upgrade but also to establish a new social settlement which guarantees a Living Income for all.

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