The energy crisis: a wake-up call

In 2017, Judith Cook decided to set up an energy company in her three-bedroom semi in Bridgend, South Wales. It was easy in those days, said Ali Hussain in The Sunday Times. You could, in effect, “buy one off the peg” by acquiring shell companies with a ready-made licence to supply electricity and gas. It was then just a case of setting up a website, buying energy on the wholesale market and selling it on for a quick profit. Cook was one of many small operators who rushed into this crowded market before licensing rules were tightened up in 2019. There was money to be made from it back then. Today, not so much. A sixfold rise in wholesale gas prices over the past year amid global shortages has wiped out many of these start-ups, leaving other larger suppliers, and ultimately taxpayers, to pick up the pieces. “Of the 49 energy firms still in the market, only six are believed to be profitable.”

Britain is wrestling with a number of temporary shortages at the moment, said Charles Moore in The Daily Telegraph, but the energy crisis is a problem of a different magnitude. The reality is that we’ve allowed ourselves to become dangerously exposed to short-term variations in gas prices, because we have so little storage capacity and depend on imported gas for almost half our electricity generation. Wind and solar energy are still too intermittent to be relied upon. We need to guarantee our energy security through other means, such as exploiting fracking technology or through the construction of a new class of small nuclear reactors.

Ministers’ assurances that they do “not expect” energy supplies to run out this winter hardly inspire confidence, said Doug Parr in The Independent. But the answer to our precarious situation is not to seek out more gas supplies through fracking, thereby exacerbating climate change, but to wean ourselves off this stuff. We could save a huge amount of energy by insulating Britain’s housing stock properly and by installing more heat pumps. When it comes to the sale per household of these sources of clean heating, the UK lags behind almost every other country in Europe, including Poland, Slovakia and Estonia. We also need to invest in a smarter, more flexible grid, and in better storage. The long-term challenge, said The Economist, is “to smooth out volatility as the switch to renewables continues”. With investment in fossil fuels in decline, a transition is inevitable but it needs to be carefully managed to keep voters onside. The risk, if this is clumsily handled, is that energy price increases boost inflation, lower living standards and generate an anti-green backlash.