Revamp our energy market
WHATEVER the next PM does to shield households against rising bills this winter, she or he must also tackle the underlying core problem: A system dangerously lacking resilience.
Vladimir Putin has weaponised his country’s oil and gas. The Kremlin dictator is betting high energy bills will make Ukraine’s supporters in Europe run out of compassion before his war machine runs out of credibility. Even if our policies had been perfect, there was no way we could have avoided a crisis, due to Putin’s iron grip on gas markets.
But matters are much worse than they needed to be because energy policy has been a mess, littered with short-sighted decisions and squandered chances.
The immediate challenge is to tide households and businesses over the worst. The crisis has exposed an urgent need for greater resilience so Putin cannot hold us so easily to ransom in future. Securing new sources of supply is essential. Italy has signed deals for gas from Angola and the Republic of Congo, while Germany has looked to Senegal.
The new prime minister needs to persuade investors to back new nuclear plants. Designating new nuclear as ‘green’ will encourage pension funds with ESG policies to come on board. Government should also help accelerate the development of new Small Modular Reactors (SMRs) by Rolls-Royce.
Until recently North Sea projects were stalling due to the net-zero agenda. There are signs of a change of heart, thankfully: Shell is investing in the Jackdaw gas field 150 miles east of Aberdeen after finally receiving approval. This will come online in the middle of this decade and could provide enough energy to heat 1.4m homes.
Bringing back gas storage capacity that was lost is another obvious step. Centrica is working with ministers to restore the Rough gas storage facility off the coast of East Yorkshire, which was closed five years ago.
PUTIN’S rampages have made the case for renewables even stronger and more attractive from a cost perspective, but huge amounts of investment are needed. Some fascinating initiatives are being contemplated, including a scheme to lay four 2,361-mile-long cables under the sea to connect a solar farm in Morocco with Devon.
This, it is claimed, will deliver enough green energy to power about 7m heat pumps. Amazing stuff – if it happens. Making the UK’s draughty housing stock more energy efficient is another sensible step and would provide work for small firms supplying insulation. Meanwhile, regulator Ofgem is not fit for purpose. It stood by while poorly capitalised, loss-making ‘challenger’ supply firms, run by a bunch of chancers, sprang up like mushrooms. Over the past year some 29 have gone bust at a cost of billions to consumers.
The rules must be overhauled so suppliers have to strengthen their balance sheets. Britain and other nations can and will adapt and evade Putin’s energy stranglehold.
It is already happening: The UK’s domestic production of gas is up 26pc in the first half of the year and there were no Russian energy imports in June for the first time on record. We need to move at pace.
Above everything, politicians and the energy industry need to tap into the pandemic spirit and adopt the same laser focus and can-do attitude we saw with Covid.
It is possible to sweep away red tape when there is enough of an incentive: Vaccines that would normally have taken many years to approve were being administered in less than two. In the words of US diplomat Rahm Emanuel: ‘Never let a serious crisis go to waste… it’s an opportunity to do things you think you could not do before.’