How can the UK tackle its ongoing energy crisis?

Written by Kunal Sawhney, Kalkine Media

The UK has been grappling with a deepening energy crisis as gas prices have skyrocketed. Gas prices have surged due to several factors, including demand in the global recovery, low levels of the reserve, low wind output in the months of August and September and low supply from Russia. To put things into context, gas prices rose by 70 per cent just in August and has soared over 4 times since 2020.

Additionally, the nation has been mired in a fuel supply crisis, acute supply chain bottleneck challenges and rising inflation concerns, which has culminated into an emerging cost of living crisis.

The energy crisis across various time horizons can be tackled by looking at solutions that can be implemented over the long term, the short term and medium term.

Long term solutions:

One way to ensure energy security and independence from gas price shocks is by doubling down on alternative energy.

The UK government has already announced focusing on green energy for the long term, which will help reduce its dependence on natural gas. However, much more concerted action can be taken to ensure UK’s energy security.

The UK has fared decently on supporting the renewable energy sector so far, however, it can further accelerate its low carbon energy transition by awarding additional subsidies to wind and solar power.

Focus on energy efficiency

The UK fares worse on energy efficiency, thus the government must create an effective and holistic strategy for implementing energy efficiency across UK homes.

According to a recent survey by the home improvement consumer website, MyGlazing.com, only 19 per cent of Southampton’s residents are aware of how to green their homes. The figure is higher than the country’s average; thus, the nation, on the whole lack sufficient awareness on energy efficiency methods.

One key measure the government must undertake is of creating awareness around energy efficiency methods and clearly communicating the UK’s progress and on achieving the same.

Some other areas the government can look at can include offering subsidies to energy efficiency companies, creating loan incentives for homeowners and landlords for greening their homes and much more.

Medium term:

Creating a tougher barrier to entry into the energy sector for smaller energy suppliers is another way to ensure companies don’t collapse in such a scenario. Ofgem has already called for having stricter stress tests prior to granting access to energy suppliers to enter the market.

On the regulator’s part, it must ensure that the move would not lead to low levels of competitiveness in the sector, as that would lead to unfair monopolistic practices on consumers.

Short term solution:

For the short-term measures, the government can support other energy intensive industries from being further impacted as several heavy industry companies have warned of stopping production amid rising prices.

The UK can implement subsidies to keep businesses afloat as the government has ruled out a price cap for heavy industries, unlike residential electricity consumers.

The knock-on effect is also expected to extend to other sectors too if the impact from the crisis is not contained. However, these are just some actions the government can undertake to stabilize the energy crisis, keeping an eye on first containing the crisis and then systematically implementing long term changes.