The new prime minister will be faced with two immediate crises in the energy and environment sphere. The first is the volatility in the international fossil fuel markets we rely upon sending energy bills up to the highest they have been in fifty years. The second is drought caused by two successive heat waves in a matter of weeks, the first being the hottest ever on record.
These two crises are chiefly caused by factors that are outside of Her Majesty’s (HM) Government’s control, but there have been certain historic decisions made by governments and parties of all political colours that have made both situations worse than they might have been. The investigation of the current situation and some of the decisions that contributed to it is essential in forming solutions.
The energy bill crisis must be viewed within the context of Russia’s renewed offensive against Ukraine; it is the ‘home front’ in the defence against Russian aggression. Following a pandemic which proved incredibly costly to deal with, and the United States’ (US) withdrawal from Afghanistan, Vladimir Putin, the Russian President, clearly felt confident that North Atlantic Treaty Organisation (NATO) members would not push back against the invasion of a non-NATO country without European Union (EU) membership.
Britain is not reliant on Russian oil and gas directly, but it does depend on the European gas market and the international oil market.
He was no doubt emboldened by European dependence on Russian coal, oil, and gas for the functioning of their economies. Germany, the economic powerhouse of the EU, is particularly dependent on cheap, piped Russian gas. Before the invasion, it was actively seeking to increase access, and therefore dependence, through the Nord Stream 2 pipeline, despite warnings and protests from HM Government, seven EU countries, and notably Ukraine.
While Berlin was initially hesitant to facilitate and take action against Russia it fell into line once the invasion began through issuing statements of condemnation and sanctions. These sanctions, and continued strategic constriction of gas supplies from Russia over the past few months, including now the shut down of Nord Stream 1, have sent the wholesale price of gas to its highest since the 1970s. Even while the United Kingdom’s (UK) gas pipelines are full – Britain acts as a giant offshore liquefied natural gas (LNG) terminal that can urgently import American and Middle Eastern gas into Europe – gas is becoming too costly for UK citizens to afford, with bills projected to rise to £500 in January.
Britain is not reliant on Russian oil and gas directly, but it does depend on the European gas market and the international oil market. The oil-weighted North Sea basin is maturing; the UK stopped being a net exporter of gas in 2004. We rely on imported gas for half our needs, mostly piped from Norway but also bought on international LNG markets from the US or Qatar among others, meaning we cannot control the price.
This is the predominant reason gas prices are now eleven times higher than in 2019. The UK is particularly exposed as it relies heavily on gas for heating (85% of homes) and for power production (40% – 45% – and gas sets the price of power as it is the ‘marginal producer’). Worse still, Britain has some of the leakiest housing stock in Western Europe, meaning up to a third of heat is wasted. In January 2023, two thirds of households are set to fall into fuel poverty.
There are three important government decisions over the two decades which have led to greater exposure. The first bad decision was slashing funding for insulation and banning onshore wind. Poorly insulated homes (Energy Performance Certificate (EPC) F), which tend to be lower income households, will pay up to nearly £1,000 more for their gas this winter compared to those in EPC C rated homes. Those in EPC D rated homes will pay £420 more. Insulation rates were high in 2012, with over two million measures being installed every year. They have since cratered, and the 19 million British homes that are energy inefficient are now more exposed to high prices and colder temperatures. Meanwhile, onshore wind provides cheap power and can even directly cut bills for homes nearby. These two decisions have added some billions onto energy bills.
The second is the closure of the Rough gas storage facility, which ministers at the time argued would save bill payers £750 million (£20 – £25 per household) over a decade. It was considered uneconomic to maintain the operability of the storage site, but the result is less gas stored for winter for emergencies. The Rough cavern was the largest gas storage site, and can hold 100 billion cubic feet of gas (20 billion – 25 billion more than annual consumption). This decision has since been reversed in light of the current situation, but it is too late to bring down prices.
The third decision was allowing nuclear power to dwindle. Nuclear power peaked at a 27% share of the UK’s power generation in 1997. The 2003 Energy White Paper declared it ‘uneconomic’ and while Tony Blair later reversed this position, citing nuclear power’s potential to reduce emissions, the malaise continued through the 2010s. This year’s Energy Security Strategy saw a commitment to build eight new nuclear power stations, but they take decades to build and eight of the nine reactors currently operational in the UK are due to close by 2030. While two new reactors will come online in 2026 at Hinkley Point C, output is now at its lowest level since 1982, with Hinkley Point B closing in August. This loss in nuclear power has led to an increased dependence on coal and gas; both of which have risen in price dramatically as they are internationally traded commodities.
Given new energy supply takes years to come online, the new prime minister will need to manage the costs of energy while maintaining the support for Ukraine evident among the British public and NATO members. Exacerbating this challenge may be a shortage of food supplies in light of the issues around grain exports due to the Russian blockade and the heat waves here in the UK.
This summer saw a record breaking heat wave instantly followed by another which was almost as hot. A lack of rain over these weeks and insufficient water storage has meant that areas of Britain have suffered drought. While drought occurs every five to ten years on average in the UK, this summer saw the driest July since 1935. Furthermore, the scientific consensus is that these heat waves and other extreme weather events, such as flooding and storms, are becoming more frequent due to climate change. As we have discovered this summer Britain is insufficiently prepared for these events.
Britain is woefully unprepared for a warmer climate, the more extreme weather it brings, and the damage to our resource security that we are already suffering.
The UK has not built a new reservoir in over three decades. A hosepipe ban has been implemented in certain areas like the South East, where demand for water is highest but precipitation is lowest. But these short term measures will not suffice in years to come: summer rainfall is projected to decrease by 15% between now and 2050 as the population increases to over 70 million.
This summer’s drought may lead to a food shortage, increasing prices further that are already high due to the inflation caused by the Russian blockade of Ukrainian grain exports and higher cost of fossil fuels. Potato farmers could suffer a drop in yield of at least 40%. The heat also reduces the size of vegetables and, bizarrely, supermarkets have been turning away shrunken crops, with one example being the rejection of 60 acres of cauliflowers by one retailer as they did not meet certain ‘specifications’.
Transport infrastructure also suffers. In the first, record-breaking heatwave in July, the UK’s national rail network had expanded so much that it was nine kilometres longer than usual. This led to severe delays and breakdowns. There have also been closures of major roads and even airports. Luton Airport was forced to close its only runway and the A14 in Cambridgeshire, which leads to Britain’s largest container port at Felixstowe, was one among many roads that had to close due to damage.
With the hot weather there has also been an increase in wildfires; the London Fire Brigade has been in its busiest period since the Second World War. Perversely, the droughts may cause flash flooding. Water cannot absorb moisture so easily when the ground is rock solid, which means that heavy rainfall or extreme storms, which become more frequent with a warmer climate, will likely cause flash flooding. This will cause yet more damage to infrastructure, crops, and property. Most tragically, there has been a huge increase in excess summer deaths.
The prime minister faces two huge challenges, both of which are arguably caused by a national and international reliance on the use of fossil fuels. In the short to medium term, Europe’s heavy reliance on Russia’s natural gas and a lack of its own resources and LNG terminals means bills will remain high in the UK, likely for at least the next few years. While climate change is a longer term issue, there can be no doubt the consequences are already with us. Britain is woefully unprepared for a warmer climate, the more extreme weather it brings, and the damage to our resource security that we are already suffering.
Jack Richardson is James Blyth Early Career Associate Fellow at the Council on Geostrategy. He is also Climate Programmes Manager at the Conservative Environment Network.
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