Happy New Year, the energy crisis is over*
Gas prices have crashed, but don’t expect your bills to do the same
Everyone tried to forget energy prices over Christmas. Tried to avoid glancing at that implacable festive party pooper: the smart meter. Those that have them, that is - those who don’t were permitted a period of blissful ignorance.
But look on the bright side for 2023. The energy crisis isn’t quite what it was. Three news stories caught my eye last week that received surprisingly little coverage compared with important matters like Andrew Tate trolling Greta Thunberg and vice versa.
You may have missed reports that wholesale gas prices have fallen to the level they were before the Ukraine War. Second, the UK has been exporting record amounts of electricity to Europe. And, third, Scotland does indeed possess 25% of Europe’s offshore wind and tidal energy potential, according to one source, a figure that has been widely dismissed recently as fake.
Amid this concatenation of good news you might wonder why you’re still going to be bankrupted by your next few energy bills which remain stubbornly, ludicrously high. But we’ll come to that.
The Financial Times reported that the “Dutch TFF” benchmark gas price fell to below €80 per Megawatt hour last Wednesday. That is the lowest in 10 months and a huge fall from the peak of €300/Mwh last summer. After that the government introduced the price cap of £2,500 on average energy bills.
This was an astonishing piece of positive news. Why aren’t we dancing in the streets? Well it may not last.
The gas price crash was partly because of the (relatively) mild winter; partly because Europeans are spontaneously saving energy; and partly because we are importing massive amounts of liquified natural gas from America. Thanks to Barack Obama’s backing for fracking, the US has gone from an oil and gas importer to an exporter in the last decade and is now filling the gap in our supplies left by Russia.
There’s a lesson here that our politicians could usefully learn. Contrary to what you’ve been told, not least by the Scottish government, it really does matter where you get your energy from. Not exploiting your own local reserves puts you in hock to crippling world markets and geopolitical superpowers of east and west.
However, Scotland’s North Sea energy resources aren’t all fossil-based. The second story that caught my eye last week was that the UK has been generating so much renewable energy in 2022 that we’ve become a net exporter of electricity to France for the first time in a decade. This is the reverse of what everyone said would happen last summer. France has all those nuclear power stations that can’t be turned off by Russian dictators, we said. Seems the nukes aren’t so reliable after all.
Britain exported four times more electricity last year than it imported, according to the report compiled by Imperial College for the bio-energy company, Drax, and reported in the Times. This was worth some £3bn. to the UK economy. Why we’re exporting so much of our renewable energy, when you might have thought we could usefully use some of it here, isn’t entirely clear. Green statistics rarely are.
The same report puzzlingly says that wind and solar together provided only 33% of UK electricity last year. And that the problem of “intermittency” is as bad as ever, because the wind doesn’t always blow. Indeed, Britain’s remaining coal-burning power stations were put on standby last month as winds dropped. We also have apparently been importing increasing amounts of coal - 40% more than last year though less of it from Russia. Coal is the most environmentally damaging fuel of all.
Energy facts and figures rarely seem to make sense. Partly this is down to green energy boosterism. For example, last year the Scottish Government finally dropped the “fake news” that Scotland has 25% of Europe’s offshore wind and tidal potential. Apparently it is only about 6%
However, no one seems to have told Equinor, Norway’s state-owned energy company which is currently exploiting our North Sea wind. According to them, in last week’s Financial Times, Scotland does indeed have 25% of Europe’s offshore wind and tidal potential. The reason, apparently, is that we have very strong winds. “The highest mean wind speeds in the Global Wind Atlas” according to Equinor - which I should say is not an entirely unbiased source since it is promoting its Hywind floating wind farm tech.
I don’t know who’s right about this - you pays your money. But we can all agree, surely, that Scotland has a lot of offshore wind energy coming down the pipe, or rather down the high voltage DC cable. And this is an unalloyed good thing. It would take government incompetence of quite heroic levels to screw up this second energy bonanza.
The UK already has the second largest installed offshore wind capacity after China - around 12 Gigawatts. A lot more is coming as we meet Boris Johnson’s target of 50 GW of offshore wind by 2030. The former Prime Minister may have been a joker, but he took renewable energy very seriously.
The cost of generating renewable energy has fallen by nearly half over the past decade alone and is vastly cheaper, when the wind blows, than gas or nuclear.
Unfortunately it doesn’t always blow, which is why the energy world market price is still set by the fall back supply: gas.
This isn’t going to change anytime soon. So even though the energy crisis may seem to be over, for us hapless consumers it isn’t. Happy New Year.