The government sought to reassure the British on Saturday night that rising gas prices would not plunge the country into an energy crisis as ministers held a series of emergency meetings with energy companies and regulators to see if the nation would keep lights and central heating on could this winter.
A high-ranking industry insider compared the meetings between Secretary of Commerce Kwasi Kwarteng and executives in the energy industry with the early crisis talks after the outbreak of Covid-19.
Gas prices rose more than 70% in August alone, and the shock has put energy companies and heavy industry companies out of business. According to some estimates, household energy bills could increase by as much as Â£ 400 in a year. A shortage of carbon dioxide, a by-product of heavy industry, exacerbates food shortages as meat producers use it for the humane slaughter of animals.
After eight hours of one-on-one conversations, Kwarteng announced further talks with regulator Ofgem on Sunday and will meet again with industry leaders on Monday to find ways to keep the industry afloat and prevent millions from falling into energy poverty. Rising natural gas prices have put seven utilities out of business this year, and the BBC reported Saturday night that four more could be added next week.
Kwarteng is also working with other ministers to avert further repercussions from the gas crisis. The food and beverage industry is already grappling with carbon dioxide shortages after gas price increases forced two fertilizer factories to close. The owner of Bernard Matthews said the lack of carbon dioxide meant “Christmas is canceled”.
In a statement on Saturday, the trade secretary made some effort to reassure the public and said there was no cause for immediate concern. “I have been assured that security of supply in the industry is not an immediate concern,” he said.
â€œThe UK benefits from a diverse range of gas supply sources with sufficient capacity to more than meet demand. The UK gas system continues to function reliably and we do not expect any supply emergencies this winter. “
He said that both customer protection and energy security are “an absolute priority” and Ofgem will ensure that customers of companies that have gone bankrupt continue to receive gas and electricity.
“We are confident that supplies can be sustained,” he added. â€œOur largest single gas source is domestically produced and the vast majority of imports come from reliable suppliers like Norway. We are not dependent on Russian oil and gas. “
Ministers from all governments would be called in to “deal with the wider effects of global gas price hikes,” he said.
A senior industry insider said the business secretary plans to hold up to 20 one-on-one meetings with energy executives this weekend to “gather intelligence” to “see how bad things could be”.
The government is believed to be willing to consider short-term measures to help businesses and households weather the looming winter energy crisis, but could also consider a longer-term transformation to accelerate the UK’s move away from fossil fuels and tackling â€œfragilityâ€ in energy retailing â€.
“There’s nothing about this situation that wouldn’t be better if we were less reliant on gas,” the source said.
Gas prices have risen worldwide after a long winter in which gas supplies across Europe and Asia were severely depleted. Storage capacities remain well below average and gas imports to Europe from Norway, Russia and the Middle East have slowed.
The rise in gas prices has also led to record electricity prices in the UK, as the UK relies on gas-fired power plants for almost half of its electricity. Low wind speeds have reduced renewable energy production in the UK and a number of problems in UK power plants and a large cable connecting the UK to France have driven market prices higher. The skyrocketing gas price has also slowed down some chemical plants across Europe that produce fertilizers whose by-product is carbon dioxide used in carbonated beverages and beer, as well as in the meat industry for stunning animals before slaughter.
Fertilizer plants in Teesside and Cheshire have already closed. Ranjit Singh Boparan, the owner of Bernard Matthews and 2 Sisters Food Group, said the supply of turkeys for Christmas could not be guaranteed. “The CO2 The subject is a massive body blow and brings us to the breaking point, it really does – that is poultry, beef, pork and the entire food industry. “
Dermot Nolan, a former Ofgem CEO, said the increases were the result of inventory depletion after a cold winter last year, reduced supply from Russia and increased demand for liquefied natural gas from the Far East.
He told BBC Radio 4 today Program: â€œI am not sure what is possible in the short term. The UK has safe, relatively diverse sources of gas so I think the lights will stay on.
â€œBut I’m afraid that from my point of view it is likely that the high gas and electricity prices will persist for the next three to four months.â€ Ofgem has already capped prices from an average of Â£ 1,138 per year to Â£ 1,277 from next month for someone with a standard variable tariff. The next official review is in April, when it could go above Â£ 1,500, according to price comparison website The Energy Shop.
Ed Miliband, Labor’s shadow trade secretary, said the price hikes were part of a cost of living crisis that underscored the need to cancel the government’s proposed Â£ 20-a-week cut in universal credit.
“It is a fundamental failure of long-term government planning over the past decade that we are so exposed and vulnerable as a country, and it is businesses and consumers who are paying the price,” he said.
“If we had invested sufficiently in a diverse, safe and CO2-free energy supply and had given energy efficiency a much higher priority, we would not be in such a precarious position.”
Darren Jones, Chair of the Commons’ Business Select Committee, said: â€œWe have known for some time that the UK is too dependent on imported gas. Low-income customers need targeted help this fall / winter. And ministers need to take a step towards building a more resilient and sustainable UK energy system. “
With around 80% of the UK’s 27.8 million households connected to the gas network, the UK is heavily reliant on natural gas.
Almost half comes from North Sea fields, the rest is delivered via pipelines from Norway. However, according to OGUK’s Will Webster, North Sea production will halve by 2027.
“If we can reduce production faster than we can reduce demand, we can reduce the risk of becoming increasingly dependent on other countries and exposed to global events over which we have no control,” he said.
Countries like Germany are much more reliant on gas from Russia, and the near-completed Nord Stream 2 pipeline under the Baltic Sea gives Nato countries cause for concern that it could give Vladimir Putin political leverage.
Gazprom, Russia’s state-owned energy company, was accused last week by 42 Members of the European Parliament from across the political spectrum of “willful market manipulation” when they called for an investigation by the European Commission.
Energy UK, which represents utility companies, said the companies would provide additional support to people this winter.
Ofgem said the record prices “undoubtedly put pressure on businesses” and it has put processes in place to help customers of businesses that have failed.