The UK is "critically vulnerable" to another energy crisis, which could result in severe price spikes, the Energy Crisis Commission has warned.
The high-level group of experts, including representatives from Energy UK, Citizens Advice and the Confederation of British Industry (CBI), pointed out that the 2021-2022 crisis laid bare multiple frailties within Britain’s energy system, spanning supply, demand, and targeted support for the poorest households. Launched earlier this year to assess the fallout of the recent energy turmoil on UK households and businesses following ’s war in , the commission discovered that Britain was "dangerously underprepared" for such an energy crisis, being one of the most affected countries in Europe.
It ranked as the second most gas-dependent country and fifth most reliant on gas for electricity among EU nations. British household billpayers have "paid the price" due to the sluggish progress in improving housing stock, delays in enforcing new-build efficiency standards, and lost chances to develop more renewable energy sources, according to the commission.
In its report published on Tuesday, the commission highlighted that on the supply front, the UK's continued heavy reliance on gas for home heating and power is concerning, with an urgent need for increased domestically-produced renewable energy and storage capacity. Additionally, the UK has been unsuccessful in cutting down energy demand, particularly from volatile energy forms like gas that are susceptible to global shocks.
The paper highlighted that Britain's housing stock is poorly insulated compared to many other nations. The report also pointed out that support schemes, which are not well-targeted, have left the poorest households struggling, thereby escalating the overall cost of the crisis for the UK and increasing national debt.
The consequences have been "catastrophic" for some vulnerable households, with nine in 10 reducing their energy consumption and 7.5 million plunging into fuel poverty. For businesses on the brink, nearly one in 10 (8%) reported halting operations either partially or completely, and one in five (22%) indicated they would dip into cash reserves to cope with soaring energy costs, the paper continued.
Dhara Vyas, deputy chief executive at Energy UK, emphasised the commission’s report carries "a sense of urgency". "Global instability was a major factor behind these price shocks so it’s sadly evident that we need to be better prepared for a repeat that can’t be ruled out," she said.
"Ultimately, we need to prevent a repeat by cutting our dependence on volatile fossil fuels through investing in domestic clean power. As well as developing our own sources of energy, we need to do much more about how we use these – such as through bold and long overdue action to make our homes energy efficient."
The commission has sounded the alarm that the UK's preparedness for future crises hasn't progressed as much as necessary, yet it acknowledges that the new Government is displaying promising efforts to address supply concerns. This includes initiatives to expand renewable energy, upgrade the grid, and advance carbon capture and storage.
David Laws, the former MP who headed the commission, said: "Our view is that the new Government is now moving in the right direction and it will need to sustain this and do so at scale and pace in order to address the challenges we’ve had on demand."
On the topic of continuing challenges, he emphasized the importance of further action: "still much more we need to do" particularly referencing areas such as demand management and support to households, outlined in the report. It calls for a definitive Government strategy to reduce fossil fuel reliance and significant investments to rectify the state of millions of homes plagued by cold and damp conditions through enhanced energy efficiency.
Moreover, the report provided guidance for ministers to deliver focused and amplified support for businesses and sectors with high energy consumption to transition away from carbon-heavy practices urgently, alongside an overhaul of the electricity market.
To improve future crisis management, recommendations touch upon better-targeted aid for vulnerable segments of society and industry most susceptible to adverse impacts and a comprehensive review of regulatory protections against supplier failures. To reduce the risk and impact of potential crises, the government is urged to create an overarching plan that includes regular stress tests examining the country's vulnerability to price volatility and supply chain disruptions.
"Future oil and gas shocks seem inevitable, but the UK remains poorly prepared to absorb these," said Mr Laws. "Experience in other countries shows that global energy price shocks need not have catastrophic impacts on economies and societies if we take the types of actions detailed in this report."
Labour's Secretary of State for Energy Security and Net Zero Ed Miliband said: "This report shows industry experts support making Britain a clean energy superpower, which is a core mission of this Labour government. Under the Tories, energy prices spiked and fuel poverty increased. Fourteen years of complacency left Britain exposed to global fossil fuel markets and the dictators like Putin who control them."
He added: "After the Tories’ catastrophic failures, we have taken decisive action. We overturned the nine-year onshore wind ban within 72 hours, have overseen the most successful renewable auction in history, set up Great British Energy and taken action to lift one million renters out of fuel poverty with new energy efficiency standards."
