‘Don’t panic’: business minister bids to calm
crisis fears as UK gas prices soar
No cause for alarm now, says Kwasi Kwarteng as energy
discussions are likened to early Covid crisis talks
The business secretary, Kwasi Kwarteng: a series of
emergency meetings between the government, energy firms and regulators are
being held this weekend.
James
Tapper, Jillian Ambrose and Michael Savage
Sat 18 Sep
2021 19.38 BST
The
government was scrambling on Saturday night to reassure Britons that rising gas
prices would not plunge the country into an energy crisis, as ministers held a
series of emergency meetings with energy companies and regulators to establish
whether the nation could keep the lights and central heating on this winter.
A senior
industry insider likened the meetings held between the business secretary,
Kwasi Kwarteng, and energy industry leaders to the early crisis talks held
following the outbreak of Covid-19.
Gas prices
surged by more than 70% in August alone, and the shock has sent energy
companies and heavy industrial firms out of business. Households could see
energy bills jump by as much as £400 in a year, according to some estimates. A
lack of carbon dioxide, a byproduct of heavy industry, means food shortages
will become more acute because meat producers use it to slaughter animals
humanely.
After eight
hours of one-on-one discussions, Kwarteng announced further talks on Sunday with
regulator Ofgem, and on Monday will meet industry leaders again to thrash out
ways to keep the industry afloat and prevent millions falling into fuel
poverty. Surging prices of natural gas have pushed seven energy suppliers out
of business this year and the BBC reported on Saturday night that four more may
go next week.
Kwarteng is
also working with other ministers to avert other knock-on effects of the gas
crisis. The food and drink industry is already grappling with a shortage of
carbon dioxide after gas price increases forced two fertiliser plants to shut
down. The owner of Bernard Matthews has said the shortage of carbon dioxide
means “Christmas will be cancelled”.
In a
statement on Saturday, the business secretary went to some lengths to try to reassure
the public, saying there was no cause for immediate concern. “I was reassured
that security of supply was not a cause for immediate concern within the
industry,” he said.
“The UK
benefits from having a diverse range of gas supply sources, with sufficient
capacity to more than meet demand. The UK’s gas system continues to operate
reliably and we do not expect supply emergencies this winter.”
He said
protecting customers and energy security were both “an absolute priority”, and
Ofgem would ensure that customers of firms that went bust would continue to
receive gas and electricity.
“We are
confident supply can be maintained,” he added. “Our largest single source of
gas is from domestic production, and the vast majority of imports come from
reliable suppliers such as Norway. We are not dependent on Russian oil and
gas.”
Ministers
from across government would be drawn in to “manage the wider implications of
the global gas price increase”, he said.
A senior
industry insider said the business secretary aimed to hold up to 20 one-on-one
meetings with energy industry leaders this weekend as an
“intelligence-gathering exercise” to “bottom out how bad things might be”.
The
government is understood to be open to considering short-term measures to help
companies and households weather the looming winter energy crisis, but could
also consider a longer-term shake-up to accelerate the UK’s shift away from
fossil fuels and address the “fragility in the energy retail market”.
“There’s
nothing about this situation that wouldn’t be better if we were less reliant on
gas,” the source said.
Gas prices
have surged globally following a long winter in which gas stores across Europe
and Asia were heavily depleted. Storage levels remain well below average, and
gas imports into Europe from Norway, Russia and the Middle East have slowed.
In the UK,
the gas price increase has led to record electricity market prices too, because
the UK relies on gas-fired power plants to generate almost half its
electricity. Low wind speeds have reduced the UK’s renewable energy generation,
and a string of problems at UK power plants and a major cable connecting the UK
to France have forced market prices higher. The rocketing price of gas has also
caused a Europe-wide slowdown for some chemical factories that produce
fertiliser, a byproduct of which is carbon dioxide, used in fizzy drinks and
beer, as well as in the meat industry to stun animals before slaughter.
Fertiliser
plants in Teesside and Cheshire have already shut. Ranjit Singh Boparan, the
owner of Bernard Matthews and 2 Sisters Food Group, said the supply of turkeys
at Christmas could not be guaranteed. “The CO2 issue is a massive body blow and
puts us at breaking point, it really does – that’s poultry, beef, pork, as well
as the wider food industry.”
Dermot
Nolan, a former chief executive of Ofgem, said the increases were the result of
depleted stocks following a cold winter last year, reduced supply from Russia
and increased demand for liquefied natural gas from the far east.
He told the
BBC Radio 4 Today programme: “It is not obvious to me what can be done in the
very short run. Britain does have secure, relatively diverse sources of gas, so
I think the lights will stay on.
“But I am
afraid it is likely in my view that high gas and high electricity prices will
be sustained for the next three to four months.” Ofgem has already increased
the price cap from an average of £1,138 per year to £1,277 from next month for
someone on a standard variable tariff. The next official review is in April,
when it may rise above £1,500, according to The Energy Shop price comparison
website.
Ed
Miliband, Labour’s shadow business secretary, said the price increases were
part of a cost-of-living crisis that underlined the need to cancel the
government’s planned £20 a week cut to universal credit.
“It is a
fundamental failure of long-term government planning over the last decade that
we are so exposed and vulnerable as a country, and it is businesses and
consumers that are paying the price,” he said.
“If we had
been investing at sufficient scale in diverse, secure, zero carbon energy
supplies and making energy efficiency a much bigger priority, we would not be
in such a precarious position.”
Darren
Jones, chair of the Commons business select committee, said: “We’ve known for
some time that the UK is over reliant on imported gas. Customers on low incomes
need targeted help this autumn/winter. And ministers need to get a move on
building a more resilient and sustainable UK energy system.”
With about
80% of the UK’s 27.8 million households connected to gas mains supply, the UK
relies heavily on natural gas.
Nearly half
comes from North Sea fields, with much of the rest supplied via pipelines from
Norway. But the North Sea output will halve by 2027, according to OGUK’s Will
Webster.
“Letting
production fall faster than we can reduce demand risks leaving us increasingly
dependent on other countries, and at the mercy of global events over which we
have no control,” he said.
Countries
such as Germany rely much more on gas from Russia and the nearly-completed Nord
Stream 2 pipeline under the Baltic Sea has been a source of concern for Nato
countries worried that it will give Vladimir Putin political leverage.
Gazprom,
Russia’s state owned energy company, was accused by 42 members of the European
parliament from across the political spectrum of “deliberate market
manipulation” last week, as they called for the European commission to
investigate.
Energy UK,
which represents energy suppliers, said firms would give people extra support
this winter.
Ofgem said
the record prices were “undoubtedly putting pressure on companies” and it had
processes in place to help customers of companies that failed.
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