Unreliable renewables will make energy more costly

It is of course good news that the Ofgem price cap for a dual fuel household bill will fall from £1,928 to £1,690 from April (that is the bill paid by the average householder). It means that there should be strong downwards pressure on inflation (the Consumer Prices Index) in April. Barring a jolt in inflation in other goods and services or an acceleration in earnings it ought to mean the Bank of England finally has the courage to cut its base rate, probably in May. None of that, though, should distract from the fact that energy prices in Britain remain far too high. For one thing, the huge fall

Why is HS2 so expensive?

Party season Unusually, the Conservatives are holding their party conference before the Labour party. It has become tradition that the Lib Dems hold theirs one week, Labour the next and the Conservatives the week after that, with the latter concluding in the first week of October. The tradition held even in 2020 when conferences moved online due to Covid. But there was a year when the normal conferences didn’t take place: 1974, when the second general election of the year was held during that time. Labour did, however, hold a shorter conference in late November in London. With October touted as a date for next year’s general election, we may

Why surging oil prices aren’t yet worth worrying about

For once we are having an old-fashioned silly season, with no pandemic, no insurgency by the Taliban, no leadership election in the Tory party and no energy crisis – with the result that a few migrants moving onto a barge has become the main story of the week. Or at least we didn’t seem to have an oil crisis until Tuesday, when European wholesale gas prices suddenly surged by 40 per cent, from €30 per MWh to over €40 per MWh. It was a reaction, it seems, to a strike in Australia which has compromised the country’s exports of liquified natural gas (LNG). Since the Ukrainian invasion, Europe has become increasingly dependent

How to stop a blackout

Will the lights go out this winter? A letter from the energy regulator Ofgem reveals just how seriously it is taking the prospect, and lays out what would happen if the UK can’t get sufficient gas to meet demand. Ofgem declared that ‘here is a possibility that GB entering into a gas supply emergency’ this winter and lays out what would happen in the event of this happening i.e. when insufficient gas is available to supply the gas network at any wholesale price. It turns out that Ofgem would seek to reduce demand by telling the largest gas users to switch off their plant. These, it adds, ‘will likely be large gas-fired power

It’s time to kickstart North Sea oil

It is reported this morning that one of Liz Truss’s first acts as prime minister, assuming she wins the Conservative party leadership election, will be to grant new licences for North Sea oil and gas extraction. But will it be enough – and quick enough – to alleviate the energy crisis? There are still substantial known oil and gas reserves in the North Sea left to be exploited. According to a report produced by the Oil and Gas Authority last September, known reserves of oil and gas in the North Sea at the end of 2020 amounted to 4.4 billion barrels of oil equivalent (BOE). This is just a tenth of

How high will energy prices go?

When dozens of energy companies started going bust in 2021, the government knew it had a crisis on its hands. The rise of the energy price cap from £1,277 to £1,971 in April – an increase of nearly £700 – led to not one but two emergency support packages. By the end, £15 billion worth of subsidies and support broadly covered the price rise for Britain’s eight million poorest households. This, it now seems, is just the start of what’s needed to get them through winter. Starting in January, the price cap will be updated every three months instead of every six months to better reflect the wholesale price of energy This

Can Zelensky afford to freeze Ukraine’s gas prices?

This morning, Volodymyr Zelensky signed a moratorium on energy prices – so while gas bills are rising all over Europe, Ukraine will remain unaffected. This honours a pledge he made on his election. Freezing energy bills is a standard populist policy in Ukrainian politics (in a country where temperatures can reach -25ºC and the elderly can’t afford to buy medicine, it’s hard to win without making such promises). But there are now serious worries about whether it could bankrupt a government that needs all the money it can get to fight a war. Energy prices will be frozen until six months after martial law ends in Ukraine: the pledge is

Rationing and blackouts are a possibility this winter

The debate about energy in the UK has largely concentrated on just how high prices will go. This is understandable given how seismic the October and January increases in the energy price cap are likely to be. But today’s announcement from Norway that it will prioritise refilling domestic reservoirs over exporting hydropower to countries like the UK is a reminder that supply may soon become an issue too. In a crisis, borders reassert themselves as Covid showed. What happened with PPE and medical supplies during the pandemic may well happen with energy this winter. This is a concern for the UK given that it imports large quantities of energy during the

Putin has Europe where he wants it

Have we reached the endgame of Vladimir Putin’s energy war against the West, the point at which he turns off the gas for good? This afternoon, Gazprom announced that from Wednesday morning it will cut the quantity of gas flowing through the Nord Stream 1 pipeline to Germany to 33 cubic metres per day. This will halve the current flow of 67 million cubic metres and is just 20 per cent of the 167 million cubic metres which flowed through the pipeline before the Ukraine invasion. Ostensibly, the cut is for reasons of ‘maintenance’. That is unlikely to wash. Nord Stream 1 relies on a compressor station powered by six

How Germany’s energy crisis could bite Britain

For now, Berlin can breathe a sigh of relief: after a ten-day shutdown for maintenance, the Nord Stream 1 pipeline is back online. Russia is once again heating German homes, fuelling German industry, and using German money to finance its war in Ukraine. But this happy exchange may not continue; the pipeline is still operating at just 40 per cent of its usual capacity, and Vladimir Putin is warning this could fall to 20 per cent next week. With Germany’s gas reserves just 65 per cent full – thanks in part to state-owned Russian energy company Gazprom’s curious oversight in maintaining them last year – and plans to refill it

The EU’s oil ban is a damp squib

When Putin’s tanks rolled into Ukraine on 24 February there was a conceit that this might be the first war which the West could fight – and win – by sanctions alone. The EU’s latest efforts to stop importing Russian oil show just what a folly this was. Donations of military equipment to Ukraine are certainly helping to keep Russian forces at bay, but economic sanctions? That is another story. Europe’s dependence on Russian oil and gas is the product of years of ill-conceived energy policy Sanctions may be helping to lower living standards among Russian citizens, but they are still a long, long way from cutting off the lifeblood

Will economic pressures weaken the West’s alliance?

This morning’s retail sales update isn’t pretty. Sales volumes fell by 1.4 per cent last month, following a 0.5 per cent drop in February (revised, and worse, than the original estimate of 0.3 per cent). The biggest fall came in non-store retail shopping: almost an 8 per cent month-on-month fall. However, the Office for National Statistics points out that overall sales volumes are still roughly 20 per cent higher now than they were pre-pandemic. But the recent drop indicates that the cost-of-living crisis is already worsening, as inflation – now at 7 per cent – is taking its toll on real incomes and is already prompting changes in consumer behaviour.

How to avoid heating your house

Spring commonly augers a quickening warmth, but for Britons this year the season coincides with a chilling marker: a 54 per cent rise in the energy price cap, bringing the average annual bill to nearly £2,000. By the next increase this autumn, that average will soar to £3,000. Thus what was, until recently, my annoying eccentricity could soon become standard practice: refusal to switch on the heating. Our gas-fired combi boiler functions pretty much as a water heater only. Above our thermometer downstairs I’ve taped a snipped-out Evening Standard headline, ‘Couple die in freezing home’. The joke wore off long ago. My husband is a moderate, civilised person. This perverse

How much is Europe (still) paying Putin for oil?

When sanctions were imposed on Russia there was a big exception: Europe was still buying and paying for oil – leading to a bizarre situation. The West was doing everything it could to help Ukraine while still sending Putin hundreds of millions of dollars a day. But how much was that revenue worth to the Kremlin? As sanctions began to hit Russia, the price of Brent crude (the oil benchmark) soared to $130 a barrel, the highest since the 2008 financial crisis: an increase of over 90 per cent. It’s fallen since then but today it’s still sitting between $107 and $115 dollars a barrel – well above where it had been weeks

Turkmenistan may emerge as a global powerbroker

While the world is watching Ukraine, there is another former Soviet republic that has quietly undergone regime change. Turkmenistan’s 65-year-old former president, known, in the manner of a comic book superhero, as ‘The Protector’, stepped down in February. With Gurbanguly Berdymukhamedov’s departure, the Mejlis Assembly duly called for elections on 12 March. As regime changes go this one was hardly revolutionary. The Protector’s son, having just turned 40 (the minimum age at which a candidate can stand for the presidency) won the election at a canter. The only surprise was that Serdar, ‘The Son of the Nation’, won just 73 per cent of the vote compared to his father’s 97 per cent winning

Britain is paying the price for its fracking panic

Between 1980 and 2005, the UK produced more energy than it needed. Today, we import more than a third of our energy and over half of our natural gas. Households are facing an increase in their annual tax bills from £1,500 to an eye-watering £3,000. While the Business Secretary may have tweeted this week that the current situation is a matter of high prices rather than security of supply, families already struggling to heat their homes are unlikely to tell the difference as they decide whether to heat their homes or pay for food. This was never a foregone conclusion. A decade ago, the US shale gas revolution was well

It’s too late to break Europe’s gas reliance on Russia

So, Nord Stream 2 will not be plugged into Germany’s gas grid. A little surprisingly, Chancellor Olaf Scholz has been first out of the blocks this morning in the western economic response to Putin’s recognition of breakaway states in eastern Ukraine. The block is not total: what Scholz says is that the certification process for the pipeline will be halted — leaving open the possibility that it might, after all, be connected if Putin starts to behave himself, or Germany becomes especially desperate for gas. Nevertheless, it is a significant move which will have an economic impact on Russia. But it is astonishing that the project was ever allowed to come

Has Macron shot France’s energy industry in the foot?

Gas prices are soaring. Europe could be about to witness electricity shortages. Power companies are collapsing by the day, and, on top of all that, the government is set to phase out traditional energy to meet its net zero target.  So might think that a cable to ship in cheap, greener electricity from the other side of the Channel is something of a knight in shining armour. Yet the government blocked the proposal today, and it was absolutely right to do so. Britain may need all the electricity it can get its hands on right now — but the last thing it should do is increase its dependence on Macron and Putin. Britain

Boris and Keir have the energy crisis all wrong

Because of soaring gas and oil prices, and the regulations that determine the energy price cap, it is almost inevitable most of us will face a rise in energy bills of between 40 per cent and 50 per cent from April. For a typical household, that’s an increase in bills of around £600 a year — which would be a painful increase in the cost of living even for those on median (middling) earnings. It would leave the average household spending 6.5 per cent of all their disposable income, after tax and benefits, on heating and power — based on official Office for National Statistics figures. That’s one in every

Why Covid means the big state is back

History suggests that when the state expands in a crisis, it doesn’t go back to its pre-crisis level once the emergency is over. After the first world war, the Lloyd George government extended unemployment insurance to most of the workforce, fixed wages for farm workers and introduced rent controls. The second world war led to Attlee’s nationalisations, along with the creation of the NHS and the modern welfare state. In the magazine this week I ask if Covid will lead to a permanently bigger state. There is another danger in all this intervention: can the country afford it? Last year, state spending exceeded 50 per cent of GDP for the first time