UK ‘dangerously underprepared’ for future energy crisis: Commission report
A report from a new expert commission has found that the UK is dangerously underprepared for, and at risk of, another energy crisis because it remains heavily reliant on gas for electricity and home heating.
The Energy Crisis Commission, 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.
The Commission has 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. Ranked against EU countries, the UK is second most dependent on gas for heating, and joint fifth most dependent on gas for electricity.
They say 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.
The Commission also found that:
- 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 of 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
The Commission found that the UK needs to accelerate its low-carbon transition to improve its resilience to another energy crisis. It recommended the UK should:
- Develop a clear strategy for shifting away from fossil fuels, particularly gas
- Increase public investment in home energy efficiency to improve millions of cold, damp, unhealthy homes
Introduce strengthened energy efficiency regulations for the private rented sector and implement the Future Homes Standard for better quality new builds - Accelerate rollout of electric heat pumps via the Clean Heat Market Mechanism and set out a plan for transitioning away from gas heating
- Continue to accelerate progress towards clean power by scaling up diverse and flexible technology, being ambitious on renewables and improving grid infrastructure and storage capacity
- Provide targeted and scale-up support for businesses and energy intensive industries to decarbonise
Pursue electricity market reform urgently
In addition, the Commission made recommendations to ensure better handling of a future crisis:
- 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
- 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
Chair of the commission the Rt Hon David Laws said:
“The UK has experienced regular energy price shocks over the last 50 years, which have damaged economic growth and hit both households and businesses. Future oil and gas shocks seem inevitable, but the UK remains poorly prepared to absorb these. Our report shows that the country remains highly vulnerable to future energy shocks and needs to make three big changes to protect itself.
“Firstly, we need to further accelerate the move away from coal, oil and unabated gas, and shift much more to home-grown renewable sources of power – with adequate storage back-up. Here the new government is giving a welcome lead in areas such as solar power, onshore wind and the stepping up of clean energy investment.
“Secondly, we need to reduce high energy demand, for example from our poorly insulated housing stock. Progress on home energy insulation has simply not been good enough, and there is a need for new measures to meet the challenge.
“Finally, we need a much more efficient and targeted system of energy support for consumers and businesses, so that money goes to those who need assistance, when they need it. Past and present support has been and is badly and wastefully targeted – with those in most need not getting the help they deserve.
“Experience in other countries shows that global energy price shocks need not have catastrophic impacts on economies and societies if we take the types of actions detailed in this report.”
Jim Watson, director of the UCL Institute for Sustainable Resources added:
“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.
“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.
“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”
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