Words by Jessica Kleczka
The energy crisis has been running rampant for months, and the UK government seems to be unwilling to act on spiralling gas prices - with energy bills set to rise by 54% in April, plunging up to four million families into fuel poverty. Research by Resolution Foundation shows that a fifth of the UK population is expected to experience fuel stress over the course of this year. There are an increasing number of calls for accelerating our shift away from fossil fuels, whilst demands for more oil and gas exploration are gaining traction. Meanwhile, oil giant Shell has been celebrating its highest profits in history. Where did it all go wrong?
For many UK households the situation is dire, with more of their money soon to be spent on energy than any previous generation, including the oil shocks of the 1970s and 80s. Towards the end of the year, almost 7% of household spending could be on heat and power - for low-income households, that number could be up to 13%. This will come on top of a National Insurance rise, cuts to Universal Credit, and inflation - all of which will disproportionately affect poor and vulnerable households. The Treasury has now announced an emergency plan allowing most affected households to “heat now, pay later” - which is nowhere near enough to safeguard the most vulnerable. As is often the case, the government is treating symptoms rather than the underlying problem - namely, our over-reliance on gas.
There are many factors at play which have brought about this crisis, with the common denominator being our over-reliance on gas. The rise in gas prices has been driven by:
While the current crisis can seem insurmountable, we do in fact already have the solutions to lowering bills for customers - what’s missing is the political will. While some Conservative MPs are quibbling over the very existence of climate targets and calling for more drilling in the North Sea, getting serious about renewables would offer both relief from the crisis at hand as well as future ones. Fuel poverty is a climate justice issue, and elected leaders have a responsibility to deliver both a swift transition towards low-carbon energy and safety measures for those vulnerable to changes in energy prices. These are the four areas in which swift government action is needed to reduce our reliance on gas and make the energy system more resilient:
Oil and gas companies in the UK are expecting near record incomes as a direct result of skyrocketing energy prices, with profits last seen in the boom years before the financial crash in 2008. Oil giant Shell has been celebrating record profits of £12 billion in the last quarter in what the company calls a “momentous year” in 2021 - that’s £32,000 an hour, or the same as an average NHS nurse earns in a year. While millions are struggling to make ends meet, BP boss Bernard Looney described his company as a “cash machine” thanks to the increasing cost of energy. Such reactions are a kick in the gut for many people having to make the decision between heating their home and buying ample groceries this winter. There has been growing pressure on the UK government to introduce a windfall tax on those profits, which could be used to soften the blow for those struggling to pay bills.
An industry representative from Oil and Gas UK previously claimed that a windfall tax would make it more difficult for the industry to invest in the transition to renewables. This is a highly misleading statement as a number of companies have paid negative tax in recent years, with the UK being viewed as the most profitable country in the world for big offshore oil and gas projects. Fossil fuel companies cannot be trusted with the energy transition: Shell, for example, cut its investment in renewables in recent years, handing its profits to shareholders instead. And while calls for more domestic oil are becoming louder, they are highly misguided: 80% of oil produced in the UK is exported, contributing little to the economy.
Rushing to extract every last drop of profits from the North Sea before the inevitable shift away from fossil fuels is irresponsible, and incompatible with the UK’s net zero targets. The government must critically review its cosy relationship with the fossil fuel industry, starting with the generous subsidies it gives to big polluters - and consider more progressive taxation, such as cutting VAT from energy bills.
Despite calling itself a climate leader, Britain is over-reliant on gas: 85% of UK households heat their homes with gas and a third of our electricity supply comes from gas power plants. Currently, levies are applied to electricity bills to fund energy and climate policies, while gas faces none of these charges. Gas is also subject to a reduced VAT rate - effectively a subsidy. Research by Oxford University has found that the current levy structure creates an active disincentive to shift towards cleaner ways of home heating, such as heat pumps. But word is that the government still doesn’t have a plan to tackle heat decarbonisation.
As Green Alliance’s Net Zero Policy Tracker shows, annual spending on energy efficiency was nowhere near where it needs to be after the Green Homes Grant was scrapped last year after upgrading just under 50,000 homes instead of the 600,000 promised. With recent analyses showing that energy efficiency measures could save the average British household about 1,000 a year in energy bills, and 76% of people supporting government funding for energy efficient home upgrades - the political mandate is clear: Britain wants to be insulated.
Renewables are the cheapest they have ever been, and now it is three times more expensive to generate electricity from existing gas plants than new onshore wind, and twice as expensive than solar. There is no reason to think that investing in renewables is not a good idea - but still, the government has been actively blocking new projects from being developed. Construction of onshore wind, which is the cheapest form of electricity generation, plunged by 94% between 2015-2019 until the government removed the effective ban in 2020. As a result of decisions to “cut the green crap” and “block unsightly structures” (i.e. wind farms), households are facing an extra £140 a year on their energy bills. If ministers had not axed financial support for new onshore wind turbines in the last five years, customers would be almost £4 billion better off now.
Contrastingly, the newly established Net Zero Scrutiny Group is calling for more drilling in the North Sea to secure a steady supply. But gas prices have always been volatile, and are determined by international markets beyond any single country’s control. There is absolutely no reason to believe that more drilling in the North Sea will bring down prices.
Community energy initiatives include the delivery of community-led renewable energy, energy demand reduction and energy supply projects. Projects can be wholly owned and controlled through communities or through a partnership with commercial public sector partners. Community energy plays an essential part in the energy transition, helping deliver energy efficiency and demand management on a scale not accessible to central government. While systemic action is needed to make sustainable living more accessible, community energy acts as an invaluable intermediary for behaviour change by engaging people, increasing local resource efficiency, and creating energy and carbon literacy.
Disappointingly, last year’s Budget and Net-Zero Strategy offered little in the way of new funding for community energy projects. Community Energy England is now calling on the government to take action on this ahead of the second reading of the Local Electricity Bill, which could create a Right to Local Supply Network to help new and existing projects with setup and running costs. The absence of community renewables in the UK’s Net Zero Strategy is unexplainable given its huge potential to drive forward the energy transition. According to Patagonia, with the right support over 260 million people could be involved in the community energy sector across the UK and EU.
Despite attempts to co-opt the energy crisis to justify more drilling for oil and gas, the UK public knows where the solutions lie: Polling by the Energy and Climate Intelligence Unit showed that only 13% agreed that removing green levies from bills was the answer to surging costs. Half of those questioned said that the best option was to decrease reliance on gas by using more renewable energy and better insulating homes. Another poll by Ipsos Mori shows that 71% want greater investment in renewable energy in the UK.
The message is clear: The energy crisis can only be solved by moving away from fossil fuels once and for all and accelerating the renewable energy transition. With another price spike expected in autumn and public support for the Conservative party rapidly dwindling after recent scandals, the government needs to start thinking seriously about whether it can afford to maintain inaction on its ambitious climate goals. With the majority of the population closely watching the situation evolve, those responsible won’t be able to escape accountability this time.
