Why are energy prices so high?
GEUK: “The turmoil in the UK energy market over recent months has been caused by a host of factors – a ‘perfect storm’ affecting the UK and markets across the world. These included the rapid increase in demand for energy – in particular gas – as the UK and other economies started re-opening after the worst of the Covid pandemic, prompting electricity and gas prices to rise.
“The situation was made more difficult over the winter as the UK saw a marked drop in the amount of wind and solar power generated, just when households needed to heat their homes. Whilst not wishing to overlook the appalling human tragedy of Russia's invasion of Ukraine, the energy situation has been worsened by the war with a further squeeze on gas supplies, resulting in more price shocks in the global energy market.”
Where do renewables stand? Why are green prices rising too?
Octopus Energy: “An outdated energy system means the price of renewables is tied to the price of gas, so rising gas prices also impact renewable prices.”
GEUK: “No matter the source of energy, if there is more demand than supply, the price goes up.
“As a country, we still rely heavily on gas for the generation of electricity (nearly 50 per cent) so the increase in worldwide gas prices does have an impact on the commodity price of electricity; so, until renewables command the highest per cent of generation in the UK, gas will be a determinant of price.”
In the medium to long term, what can we do to tackle the energy crisis?
Octopus Energy: “It is now crystal clear that becoming energy independent is the way forward. Every new wind turbine loosens our dependence on imported fossil fuels. There’s huge potential for renewable energy in the UK. It is now the cheapest form of energy, meaning green energy generated from a wind or solar farm near you benefits your pocket as well as the planet.
“To turn the green energy vision into a reality, we need to build renewables quicker than ever before. Collectively, we need to apply the same level of urgency that developed Covid vaccines in record time, to building more local green energy.”
Simon Pickering, Ecotricity: “We already have the technology to solve the energy crisis within the next few years, through insulation, insulation and more insulation combined with an upgrade of the electricity grid, allowing for better capacity and a flexible smart grid.
“Green gas from herbal leys and waste plant material rather than hydrogen can quickly simply replace any gas requirements without any changes to the gas grid or household appliances. We urgently need a new positive national planning policy to encourage all forms of renewable technology.
“At a local level, we need a genuine project speed for all local planning decisions on renewable energy applications. If this was combined with incentives for local authorities to approve renewable energy projects, similar to the new homes bonus, this would provide confidence for developers, landowners and investors to ensure the UK is self-sufficient, with 100 per cent renewable energy within the next few years.”
In the short term, how can we address the fuel poverty that the crisis is causing?
Simon Pickering, Ecotricity: “To address fuel poverty in the short term we need an immediate windfall tax on North Sea operators to claw back some of the £20 billion extra profit they’ve made this winter to fund remove Vat and other taxes from domestic bills.
"We urgently need to restore the tax on North Sea fossil fuel companies to pre-2016 levels. Currently, the UK only takes $2 per barrel in tax, compared to Norway's $22 per barrel. The taxpayers' subsidy of £18.6 billion for decommissioning oil rigs should also be removed. Rebalancing these taxes could fund the retrofit revolution this summer to cut energy use for the poorest households next winter.
“Then, introduce a progressive means-tested energy tax, creating bands for annual consumption so that the more energy you use the more expensive it gets. At the lower end, we would have a tax-free element of energy consumption, as we do with income.
“The top 10 per cent of wealthiest people are responsible for 50 per cent of carbon emissions – they can and should pay much more for this than they do. There is then a need to completely reform the way the energy market works in the UK, so it is not driven by the price of fossil fuels in the balancing market."