The energy sector has never been under more pressure – reflective of the ‘unprecedented challenges’ of pandemic living alongside increasing global conflict and uncertainty as well as the race to net zero.
The last six months have seen a stream of energy suppliers going under; Ofgem announcing a 56 percent increase in the energy price-cap; and record prices at petrol pumps. The picture is starker still when set within the context of soaring cost-of-living for consumers as many bear the brunt of rising heating and food costs – the crisis hitting the UK’s poorest households the hardest, its impact compounded for those in work with inflation overtaking pay growth and the threat of increased National Insurance contributions.
Fuel poverty is rising up the domestic political agenda, as headlines warn of thousands more households having to make tough decisions between ‘heating and eating’ – staying warm in their homes or putting food on the table.
Alongside this, energy companies have still been getting to grips with the 2050 net zero target. They are faced with additional demands for investment in infrastructure and technology, as well as a far from certain future political and regulatory environment.
All of this was challenging enough for companies operating in the UK energy markets, as well as for Government. Keeping the lights on, slashing carbon emissions, and keeping customer costs low while remaining commercially competitive is a challenging combination to balance, especially alongside other pressing Government priorities such as the risk of inflation and regrowing the economy post-Covid.
And political pressure has been growing, with the drive to net zero blamed by some for increasing costs and issues in the sector. Only last week, Nigel Farage launched ‘Power, not Poverty’ – a campaign calling for a referendum on the 2050 net zero goal. The ‘Net Zero Scrutiny Group’ has been increasingly vocal and feels that its arguments are landing positively with the general public. Indeed, even Boris has shown his doubts with regards to the transition, arguing in Cabinet that gas must continue to play a role in our energy mix up to 2050.
Russia’s invasion of Ukraine has tipped these energy challenges into a full-blown energy crisis. Government’s announcement that it will end imports of Russian oil and gas by the end of the year has piled further pressure on an already fragile ecosystem. However, crucially, it has already led to a reframing of the energy transition. No longer is net zero front and centre; the drive to move away from oil and gas is now an issue of domestic impendence and energy security.
Secretary of State for Business, Energy & Industrial Strategy, Kwasi Kwarteng, summed up this shift, tweeting: “This is no longer about tackling climate change or reaching Net Zero targets. Ensuring the UK’s clean energy independence is a matter of national security. Putin can set the price of gas, but he can’t directly control the price of renewables and nuclear we generate in the UK”.
This month we will see Government bringing forwards its ‘Energy Independence Strategy’. The paper looks set to complete the reframing of the energy debate, as Government looks to move from energy crisis to energy transition. Energy independence and security are now the driving factors in the energy policy landscape.
We will bring you our analysis of what’s included in the strategy and take a look at what it means for the sector. To discuss how the political landscape is shifting with regards to energy and decarbonisation policy, and what it means for you and your business, please get in touch with Tom Bradley.