Dash for gas?
Whilst the Chancellor (not pictured here) may foresee gas as our energy future, Britain is grappling with a gas supply crisis, with the extremely cold weather depleting gas reserves and spiking gas prices.
In Parliament this week, Energy Minister Greg Barker said: “While high prices in a spike are uncomfortable, they are a sign that our market is working.” Yet National Grid has been in touch with heavy energy users for contact details in case it has to cut supplies. This would be damaging for companies that must sustain high energy usage, as brickmakers Ibstock pointed out on Radio 4 this week , with its kilns needing to run 24/7/365. Asked if this was down to “bad luck or bad planning,” Ibstock replied, “bad planning.”
Meanwhile, coal fired power stations close and maintenance of gas supplies from Norway may squeeze supplies further:
- Scottish Power’s 1,200 megawatt (MW) Cockenzie power station near Edinburgh stopped operating after 45 years of service this month.
- RWE will shut its 2,000-MW Didcot facility for good this month as well.
Energy bills are set to jump by as much as £200 over the next year as a result of continuing gas shortages, potentially forcing more than a third of households to switch off their heating entirely, energy consultants warn. Emergency deliveries of liquefied natural gas from Qatar brought some relief, but supplies remained strained and would lead utility companies to raise gas and electricity bills.
On Radio 4, Laura Cohen, chief executive of the British Ceramic Confederation, commented that in the longer term we are likely to face major problems as the UK increases its dependence on gas for electricity and heating (both industrial and domestic). Without providing for extra storage, the problem of high prices and price volatility will get worse at times of supply constraint.
Meanwhile, over in Parliament, the Energy Minister said:
“We are aware of industry concerns about current high gas prices and low storage stocks, but while high prices in a spike are uncomfortable, they are a sign that our market is working and that we are attracting the gas that we need through a diverse range of infrastructure. Price volatility is not something that we can completely remove, and nor should we seek to do so, from our market. It is the key mechanism that enables our market to balance efficiently at the lowest cost to consumers, and it incentivises investment in new infrastructure such as storage.”
Industry and consumers might disagree that high gas prices in the “spike” have attracted sufficient gas to the UK, nor that it is incentivising investment in new infrastructure such as storage.
Gas storage sites have been depleted by 90%, with the equivalent of less than two days’ consumption remaining, data from Gas Infrastructure Europe shows. If the cold persists, as is forecast, the UK may yet need to cut gas supplies to some big industrial customers, as it did in 2010 at a time of severe gas shortages.
The average “dual-fuel” gas and electricity bill in the UK currently stands at a record £1,300 a year. This would rise by £130 to £1,430 if prices increased by 10 per cent, while a 15 per cent increase would add £200, taking the total for the year to £1,500. An increase in various green charges and subsidies is set to add a further 2.5% to customers’ bills next year.
“Our market is working” ?