The energy crisis requires leadership. This government does not have it

Why Whitehall’s new energy strategy is just the same old story

April 14, 2022
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Nuclear reactors currently being built in the UK are years behind schedule and billions over budget. The government’s solution appears to be just to build more of them. Image:

The government’s new energy security strategy is a profound disappointment and a missed opportunity. The insecurity created by the invasion of Ukraine and the breakdown of the long-standing energy trade links between Russia and Europe will not be eradicated by any of the measures set out in the document. The policies being proposed are simply a reassertion of old ideas which have dominated Whitehall thinking for the last decade. There is no strategic thinking, no analysis of what has gone wrong and no sense of debate about the serious alternatives which could make at least some difference to hard-pressed consumers.

The UK government cannot be blamed for the surge in global prices as the world came out of the Covid recession last year, nor for Putin’s invasion of Ukraine. But it does have responsibility for the response. 

The various policies being proposed have been floated over the last two weeks to test public reactions. The result is a measure of the decline in the quality of policymaking and of the distance which exists between Whitehall and the real economy—the businesses and households who depend on secure, affordable supplies of energy. The authors of the paper simply do not understand the market they are writing about. Almost every one of the proposals being made lacks an understanding of the timescales involved or the global context of which the UK is simply one, relatively small, part. There is no analysis at all of how the international energy market might now respond to the new world order.

Instead we have a tired list of old favourites. More EPR nuclear reactors, even though those already being built are years behind schedule and billions over budget. How many years does the government think will pass before any new nuclear station produces a single megawatt of power?

More on- and offshore wind, despite the fact that the grid is not prepared to cope with existing plans, let alone the new additions. And despite the fact that, since wind and solar are intermittent, more back-up power will be needed to cover the times when the wind is not blowing. The only available source of such back-up power is gas, and nothing in the proposals provides any incentive for that gas capacity to be put in place.

There is to be more charging capacity for electric vehicles—a good measure but not backed by any analysis of the developing problems in the supply chain. These problems typically regard the development of electric vehicles, not least the looming shortage of crucial advanced materials.  

Heat pumps remain the preferred answer to the challenge of home heating. But there is still no thought given to establishing incentives for homeowners who are perfectly happy with their existing, predominantly gas-powered boilers to scrap what they have and invest thousands of pounds in new equipment.

Fracking is to be re-examined with a new study from the British Geological Survey—although quite what new knowledge is expected, given the previous comprehensive work done by the BGS, is unclear.   

The list of half-baked initiatives goes on, but only serves to emphasise how much is missing. Where are the measures to provide immediate relief from the UK’s vulnerability to the international market? In the short term, we need to import gas. The EU has a similar need and has created a single buyer system to find the gas internationally. That will create fierce competition and no doubt higher prices. But what is the UK doing? Where are the long-term contracts to secure the supplies we need?

And what about the costs? For consumers, including businesses dependent on energy, the immediate challenge is the prospect of even more increases in the amount they have to pay. The measures, including limited short-term loans and council tax rebates to the poorest, do not address the problems of businesses, large and small. In fact, the strategy raises the prospects of even greater charges as the costs, particularly of new nuclear, are added to consumer bills.

The final and greatest weakness is the absence of perspective. Energy crises last long. There is no worldwide physical shortage of energy in its multiple forms. The price hike of the last few months will subside as new production comes onstream from numerous sources. The challenge of policy is to help consumers through a difficult period rather than to panic and to impose further costs. Energy is highly taxed and the most effective move the government could make now is to reduce that tax take on a temporary basis as a stabilisation measure. In the process, they should reconsider the whole basis of energy taxation and consider again the neglected idea of a carbon tax as a means of incentivising the eventual transition away from fossil fuels.  

In short, a real strategy should take a long and considered view, managing the short-term issues but applying a rational analysis which can help deliver a more stable and secure energy future. Is that really too much to hope for?