RUTH SUNDERLAND: Politicians and the energy industry must fix the market


RUTH SUNDERLAND: Politicians and the energy industry must tap into the pandemic spirit and adopt the same laser focus and positive attitude that we have seen with Covid

  • Britain and other nations must adapt to escape Putin’s energy stranglehold
  • UK domestic gas production up 26% in first half
  • No Russian energy imports to UK in June for first time on record

Whatever the next Prime Minister does to protect households from rising bills this winter, he or she must also tackle the central underlying problem: a system that is dangerously lacking in resilience.

Vladimir Putin has militarized his country’s oil and gas. The Kremlin dictator is betting that high energy bills will make Ukraine’s supporters in Europe run out of sympathy before his war machine loses credibility. Even if our policies had been perfect, we could not have avoided a crisis, due to Putin’s iron grip on the gas markets.

But things are much worse than they should be because energy policy has been a mess, littered with short-sighted decisions and squandered opportunities.

Challenge: Whatever the next Prime Minister does to protect households against rising bills this winter, he or she must also tackle the central underlying problem: a system that is dangerously lacking in resilience

The immediate challenge is to avoid the worst for households and businesses. The crisis has revealed an urgent need for greater resilience, so Putin cannot hold us to ransom so easily in the future. Securing new sources of supply is essential. Italy has signed agreements for gas from Angola and the Republic of Congo, while Germany has turned to Senegal.

The new Prime Minister must persuade investors to support new nuclear power plants. Designating new nuclear as “green” will encourage pension funds with ESG policies to join us. The government should also help accelerate the development of new small modular reactors (SMRs) by Rolls-Royce.

Until recently, projects in the North Sea were stalled 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 1.4 million homes.

Recovering lost gas storage capacity 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 renewable energy even stronger and more cost-attractive, but huge investment is needed.

Some fascinating initiatives are being considered, including a project to lay four 2,361-mile-long cables under the sea to connect a solar farm in Morocco to Devon.

This, it is claimed, will provide enough green energy to power around 7 million heat pumps. Incredible stuff – if it happens. Making the UK’s drafty housing stock more energy efficient is another sensible step and would provide work for small businesses providing insulation. Meanwhile, regulator Ofgem is not fit for purpose. He stayed on the sidelines as ill-capitalized, loss-making “challenger” supply companies, run by a bunch of chancers, sprouted like mushrooms. Over the past year, some 29 of them have gone bankrupt at the cost of billions of dollars to consumers.

Rules need to be revised to force suppliers to strengthen their balance sheets. Britain and other nations can and will adapt and escape Putin’s energy stranglehold.

It’s already happening: UK domestic gas production increased by 26% in the first half of the year and there were no Russian energy imports in June for the first time never recorded. We have to keep pace.

Above all, politicians and the energy industry must tap into the spirit of the pandemic and adopt the same laser focus and positive attitude that we have seen with Covid.

Red tape can be swept away when there is enough incentive: vaccines that would normally have taken many years to be approved have been delivered in less than two hours. In the words of US diplomat Rahm Emanuel: “Never let a serious crisis go to waste…it’s an opportunity to do things you thought you couldn’t do before.

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