How did the energy crisis come about?

With colder weather now arriving it’s easy to think that the energy crisis will get worse before it gets any better.

The demand for more heating in homes and offices will only put supply under more pressure and continue to push prices in an upward trajectory.

Gas prices in the UK have more than quadrupled over the last year to highs of 180 pence per therm, from around 40p/therm this time last year. In the last month alone, prices have climbed by 70 per cent.

But how did we get into this position in the first place?

Low storage volumes, disappointing Russian flows, North Sea glitches and limited LNG deliveries in the face of still-rising Asian prices alongside tightening coal markets, have all been contributory factors.

Rough decision

The decision to permanently close the U.K’s largest offshore storage facility, Rough, in the summer of 2017 deprived the country of 70 per cent of its total gas storage capacity and increased the dependence on imported gas by pipeline from Norway and Russia, or by LNG from the US and Qatar.

The slow boat to China

With China’s economy bouncing back as the country emerges from the after-effects of COVID-19, there has been record demand for gas to keep machinery running and the lights on.

To satisfy this, China’s imports of gas via super-chilled tankers were expected to surge by almost a fifth, meaning fewer shipments travelling to Europe from countries such as Qatar.

Russian gas roulette

Russia’s state-backed gas company, Gazprom, has refused to increase its exports to Europe, to help meet the high demand – despite record-high prices across the continent – in what is seen as a strategic move by Vladimir Putin.

Adding fuel to the fire

A large fire at the interconnector site, near Ashford in Kent, has severely impacted on electricity imports from the sub-sea cable that runs between France and Britain.

The IFA1 interconnector has been used to import electricity from France, to support the UK grid, since 1986. It was only operating at half capacity at the time of the fire because of planned maintenance work and is expected to continue to run at reduced capacity until the end of March due to this latest incident.

The energy mix

A more diversified energy mix mitigates against supply issues because there are more options to get around the problem. Countries that have prioritised domestic low-carbon energy are less prone to risk and able to ride out the storm easier.

But low wind output and a lack of investment in other forms of renewable energy, as some see it, means there isn’t enough green energy being produced in the U.K to meet demand without firing up environmentally damaging, fossil fuel-burning power stations or importing energy from abroad.

… but it’s not all bad news.

On 1 October, commercial electricity will start to flow on the 450-mile North Sea Link, the world’s longest sub-sea power cable, connecting British and Nordic power markets for the first time.

Supply will initially be limited to about half of its 1,400-megawatt capacity, with plans to gradually increase to full output by the start of next year.

How to make your business more energy efficient

With fears over an energy crisis making headline news and more people returning to the office, there has never been a more pressing time for businesses to implement an energy efficiency strategy.

Today energy is climbing up the corporate agenda, triggered by rising costs as well as sweeping environmental and social trends, including climate change and ambitious net-zero carbon targets

Business owners have no control over the price of gas or electricity, as these are dictated by market forces and geopolitical issues, but what they can do is manage consumption more effectively. As the old saying goes, ‘the cheapest unit of electricity is the one you never use’.

To be able to reduce consumption, first businesses need to understand when and where they are using energy. Energy Management, for example, has bespoke software that enables us to assess the energy performance of a business across its asset base.

Once the data has been gathered and analysed, informed decisions can then be made about where savings can be made.

This may result in equipment upgrades or relatively low-scale investment in timer switches for lights or the installation of longer-lasting LED lightbulbs.

Encouraging behavioural change amongst employees is key to the success of an energy efficiency strategy.

Most money-conscious employees wouldn’t leave lights on unnecessarily or not properly shut down their electrical devices but gentle reminders from an appointed, in-house ‘energy champion’ never do any harm.

Alternatively, you could turn to an external energy agency or energy managers to conduct an energy audit and determine how you can use less power without compromising business throughput, output or thermal comfort and wellbeing of staff.

Here’s a summary of the steps you can take:

  • Get an energy audit

Air leaks and issues around boilers and insulation will be identified along with any energy-saving opportunities.

  • Purchase energy-efficient equipment

Check the energy star rating of appliances and, where applicable, replace with more energy efficient models

  • Reduce peak demand

Try to stagger working hours to spread the load and bring energy consumption down during periods when it is typically at its highest.

  • Lighting

LED lightbulbs and timer switches that turn off the lights when not in use are simple measures that don’t have to break the budget

  • Heating

Check to see if the boiler that supplies heating to the building is serviced and well-maintained.

Install thermostats so that rooms are only being heated when they need to be.

  • Switch off idle devices

A great office energy-saving tip is to have your computer add-ons (printers, monitors, etc.) connected to power strips so that the flip of a single switch can shut down several devices at a time.

  • Office redesign

A simple redesign of the layout of your office may result in more natural sunlight entering the building and, therefore, reduce the need for artificial light. Greater exposure to natural sunlight is also known to improve the well-being of staff.

  • Natural protection

Planting trees in strategic places around the outside of the building will provide shade from the sun and act as windbreaks during the winter months and can help reduce demand for air conditioning and heating

  • Cultural change

Get buy-in from employees so that they personally invest in energy-saving measures.

Contracts for Difference auction supports green energy technology

A pot of money totalling £265milion has been made available by the UK government to support renewable energy projects in the upcoming Contracts for Difference (CfD) auction.

The majority (£200m) will be invested in fixed-bottom offshore wind projects, in a bid to help the UK meets its target of 40 GW capacity by 2030 while floating offshore projects can bid for funds for the first time.

Tidal, geothermal and wave technology fall into this category, with £55m put down. The remaining £10m will be used to support technologies such as onshore wind and solar.

Energy Minister Anne-Marie Trevelyan said: “The CfD scheme has helped the UK become a world leader in clean electricity generation and lowered prices for consumers.

“The new plans set out today deliver on the Prime Minister’s Ten Point Plan and will support the next generation of renewable electricity projects needed to power our homes and meet our world-leading climate change targets.”

The CfD tariff replaced the Renewables Obligation and is designed to help the UK meet its net-zero targets through the low-carbon generation of electricity whilst also ensuring an interrupted supply of electricity feeds into the network.

The government is focused on encouraging green energy procurement, with 12GW of wind and solar energy being targeted through the scheme.

Unlocking Britain’s potential

Environmental Audit Committee chairman Philip Dunne MP said: “I am delighted to see that the potential of floating offshore wind and of the tidal stream has finally been recognised as contributors to our future low carbon energy mix.

“This support for renewable energy will help net-zero Britain, provide welcome demand signals to investors, and give industry the confidence it needs to secure the skills for the future.

“While this investment is extremely welcome, the government must also evaluate the infrastructure supporting renewable energy.

“The investment can only do so much if the infrastructure cannot support the projects hoping to be achieved.

“Our committee has highlighted in our work on technological innovations that the connection of expanding offshore wind farms to the grid must be reviewed and that adequate investment is required for deep water

Russian policy prompts energy supply crisis fears

Energy Procurement and Management

Daily Telegraph report warns of potential gas shortfalls in the UK if a ‘perfect storm’ materialises.

Depleted gas storage capacity combined with a host of other factors could result in factories being forced to shorten their working week due to power shortages. That is the potential doomsday scenario highlighted by a report in The Daily Telegraph.

In the report, Marco Alverà, chief executive of the Italian pipeline and infrastructure group SNAM, says the UK government may live to regret the decision not to fund the refurbishing cost of the UK’s biggest gas storage site at Rough on the Yorkshire coast.

Centrica subsequently shut down the facility which accounted for 70% of the UK’s gas storage in the summer of 2017, leaving Britain more dependent on imports and exposed to price spikes.

“The country is blessed with the geology of the North Sea but it hasn’t used those advantages, and now it has to rely on German and Dutch storage,” Mr Alverà said.

Russia president Vladimir Putin’s strategy of restricting the seasonal flows of pipeline gas into Europe for his own political gain has added to the sense of uneasiness.

“The UK is more vulnerable to a gas supply crisis than other Western European countries. It has way too little storage and it is buying more Russian gas than it realises through the Netherlands,” added Mr Alverà.

Energy procurement

With coal being phased out in the drive towards net zero carbon, gas has become the predominant source of energy for power plants. Gas prices have gone through the roof and the balancing act of energy procurement has arguably never been trickier.

The crunch has been compounded by voracious demand for liquefied natural gas (LNG) in Asia, the report states, along with a host of complications in the global gas industry linked to Covid. “The storage situation in Europe has turned increasingly dire, with winter quickly approaching,” said Francisco Blanch, chief energy strategist at Bank of America.

Should the UK be hit by another Beast from East cold weather blast and heating demand goes up as a result, added pressure would be placed on the UK’s diminished storage and it is likely prices that are already at record levels will continue to climb.

Buying in gas may become so expensive that businesses will have to reconsider how they operate. Also, this year’s disrupted shipping market may mean that shipments do not arrive in time to meet demand in the coldest months.

Gas and electricity interconnectors with mainland Europe could meet the demand but these too have become politicised post-Brexit and supply through this network of pipes is not as straightforward as once was. Other countries could be prioritised over the UK, for example, if there is an energy shortfall elsewhere on the continent.

While the report concludes by saying that a three-day working week is unlikely, it does highlight the myriad of factors that can affect supply and subsequently the energy price markets.

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