The soaring cost of fossil gas is squarely to blame for the UK’s energy price crisis, said industry experts, as efforts by some commentators to pin the blame on wind power were dismissed as a distraction from the need to decarbonise faster than ever to reduce reliance on the polluting, largely imported fuel.
Energy has dominated news headlines in the UK over the last few days, amid a fivefold increase in wholesale gas prices since January and soaring power costs that have fuelled predictions of devastating consumer hardship, fears that scores of smaller suppliers will go out of business, and knock-on effects to food and drink supplies from shortages of industrial gases. Energy secretary Kwasi Kwarteng was even forced to promise “there is no question of the lights going out”.
With the UK power system – even after its greenest ever year in 2020 – still often relying on gas for around half its generation, most of it imported, the nation has been hit hard by a global supply crunch exacerbated by a rebounding world economy, low storage levels and unreliable flows from Russia.
In the power sector, the problem has been aggravated by lower than usual wind resources and damage to an interconnector cable linking the UK with France.
Gas volatility to blame
That has led some commentators among the UK’s renewable-sceptic ‘usual suspects’ – notably the vehemently anti-wind power Telegraph newspaper – to blame Britain’s fast-growing turbine fleet for the problems, or in the case of one pressure group, the self-styled Global Warming Policy Forum, demand “suspension of climate policies” and a new effort to boost domestic oil & gas production.
But Sarah Brown, an analyst at energy think-tank Ember, said: “It’s absolutely true that wind generation has been lower, but if you compare that to the astronomical, unprecedented volatility in gas prices we are seeing, it’s just incomparable.
Investing in new gas infrastructure of assets would just be throwing good money after bad.
“Investing in new gas infrastructure of assets would just be throwing good money after bad. The only option to avoid this price volatility is to reduce reliance on fossil fuels and gas.”
New analysis from Ember claimed the soaring gas price was responsible for 86% of a tripling of UK wholesale power to more than £100/MWh ($137/MWh) in the 12 months to August 2021. Costs have spiked further since then, with UK day-ahead prices above £150/MWh on 21 September.
By contrast, Ember said using gas is three times more expensive to generate power than new onshore wind plants and twice the cost of solar – with renewables still cheaper even if the price of carbon is factored out of the fossil fuel’s costs.
Tim Dixon, a lead analyst at energy market specialist Cornwall Insight, said the gas price is “the key reason” for the sustained high energy costs currently causing turbulence in the UK market.
“Fundamentally, the marginal generator on the power system is still gas-fired generation. As long as that’s the case, [that is] setting the wholesale price in the GB markets.”
Dixon said other factors, including – but by no means exclusively – a spell of low wind output had added to the problems facing the UK power market to produce “a double-whammy of high gas prices combined with tight power supply margins”.
There will be future bumps in the road in a “transitional period” for the UK energy system as coal and nuclear plants drop off the network over the rest of the decade, he warned.
But Dixon said an increasingly green UK energy system should be far better able to cope with periods of low wind output, while the current crisis could play a role in “highlighting increased energy security we can have under a decarbonised power market where we don’t have the same level of demand for international gas”.
Diverse and decarbonised system
Analysts said further penetration of wind and solar into the UK system, plus deployment of technologies such as large-scale storage to smooth supplies, will increase renewables’ ability to operate efficiently in the market. For example, Britain is aiming to deploy 40GW of offshore wind by 2030, and increasingly looking to link that with green hydrogen production or store the output via battery systems, rather than always sending it straight to the grid.
Fossil gas, by contrast, is destined to remain an unreliable partner.
That demands an urgent stepping up of efforts to secure greener alternatives, not just in the power sector but crucially in wider energy-intensive areas of the economy such as domestic heating and industrial process, said commentators.
Frank Gordon, policy director at the Association for Renewable Energy and Clean Technology, said: “The ever-present risk of high and volatile natural gas prices demonstrates the importance of a diverse decarbonised energy system – using all the different renewable and clean technologies available to us, including bioenergy, energy storage and marine, all working together to ensure a resilient system and lowering exposure to international prices and lowering emissions.
“We must also have a renewed focus on energy efficiency and insulating our homes to reduce our overall energy usage as a first step.”