Liz Truss’ government has finally arrived as the country heads towards a pivotal winter. There’s been ceaseless debate about what its much anticipated support package should include, but the fundamentals were always clear. First, it is expensive to protect ourselves from Russian manipulation of gas markets we rely upon. Second, we must put all efforts into transitioning away from gas to make sure we never pay such a price again.
Following the collapse of the Soviet Union, the Kremlin always knew Russia’s fossil fuel reserves would be the basis of its power. Its neighbours’ dependency on bountiful, cheap hydrocarbons provides Putin his ability to wage economic warfare. His last throw of the dice to win a war which has gone wrong is keeping Europe cold and dark to weaken our support for Ukraine.
He did not expect the democratic response to his invasion of Ukraine to have so much resolve. While the Russian economy has weathered sanctions so far, lack of access to Western technology to keep its industries running will bite. If European countries avoid capitulation, there’s a plausible scenario where Russia is forced to settle in Ukraine before becoming beholden to the regime in China.
Here in the UK, the government’s energy support package will be a relief to millions, especially business owners, who are fully exposed to the gas market. Given the scale of the crisis and the lack of means to target support well in such a short space of time, it’s likely that market wide support was the only viable solution.
The Treasury is spending £150bn to pay our energy bills – and taking away incentive to consume less – for two years. It makes fiscal sense to finally take insulation seriously to reduce waste and cut bills further. The Treasury could still top up the ECO scheme to insulate the draughtiest fuel poor homes so it can borrow less in the long term. It should also create tax incentives and financing mechanisms for those who can afford it themselves, but may need help to spread the costs.
Then there’s the ongoing debate around the supply side. There’s no denying we need gas now and for decades yet. But there’s also no avoiding the fact that the North Sea doesn’t have much left. There’s certainly not enough to meet our own high demand for our gas boilers and power plants, let alone Europe’s, where much of it is exported to at market price. We can’t rely on North Sea gas alone. We need alternatives.
The government is lifting the moratorium on fracking so it can go ahead where local communities support it. Communities could potentially be more persuadable to host the infrastructure than they were before, but other barriers like population density remain. It is by no means a silver bullet, even if it’s economically viable at all.
Where there has been big change since the mid-2010s is in renewable energy. Wind and solar now boast the cheapest prices and highest popularity, including among Conservatives. More than four-fifths of those planning to vote Conservative in the next election are in favour of onshore wind and solar, according to polling from Survation.
If we’re to lift the fracking moratorium to see if it helps eases the pressures on our energy markets, shouldn’t we lift the onshore wind ban to allow those who want it to have the cheap power we know wind certainly provides? It’s true that challenges like intermittency remain for now with renewables, but the market is solving that problem. Wind and solar are simply cheaper, more secure, and more sustainable than any fossil fuel alternative, and necessary if we’re to become a net energy exporter by 2040.
Another barrier to building a stronger energy system is regulation. Jacob Rees-Mogg, the new Business Secretary, should amend the Energy Security Bill to provide Ofgem with a new energy transition mandate. We badly require the investment in the grid to be able to bring more supply online, but it is being held back.
There’s little doubt that fossil fuels are on the way out, even if we need more to keep the lights on for now. To secure our energy supplies in the long term, bring bills back under control, and meet our climate commitments, however, we need to cut energy waste and foster a supply side revolution in clean energy.