As the increasing gas prices are pushing up the cost of living, Karthik Muthuswamy looks at how the transition to green energy from oil and gas might be the solution to the energy crises.
People across the UK are struggling to pay the energy bills and heat their homes as gas prices hit record highs. Green energy prices on the other hand have been falling and have become cheaper than fossil fuels.
Imran, a vegetable seller living in Birmingham is affected twofold by the increasing food and fuel prices. While the higher prices have increased his “monthly expenses at home”, the increased cost of “transportation and storage of fresh food” has reduced his profits and earnings significantly.
Why are gas prices high?
The wholesale market price of gas has been high even before the Russian invasion. This is due to the imbalance in supply and demand. In 2021, the cold winter increased the demands and the lockdowns due to the pandemic led to lower supply. On top of that, Russia’s invasion of Ukraine made it worse. Since the beginning of 2022, the gas price per therm has increased by nearly 150%, according to data from Morningstar.
The UK is particularly hit hard because of the increasing gas prices. Gas generates a third of the country’s electricity and nearly 85% of the homes have central gas heating.
With the ongoing invasion and the energy crises, the market price is set to increase.
Are there cheaper alternatives? What about green energy?
The UK is not heavily reliant on Russian gas. In fact, it imports less than five percent of its gas from Russia. But the price of gas is dependent on the wholesale market price. Even if the UK increases its production in its reserves, it won’t affect the market price, Business Secretary Kwasi Kwarteng has said.
Unlike the increasing gas prices, green energy prices have been falling according to the electricity generation costs data from the Department for Business, Energy & Industrial Strategy. It is not dependent on the market price and can be controlled locally.
An analysis from Carbon Brief shows that running a gas plant in February 2022 cost around four times as much as we’d pay for new solar or wind projects.
What is the UK’s electricity mix?
During the last decade, the UK has made significant progress in replacing the use of fossil fuel with green energy, driven predominantly by the wind. The share of the country’s electricity that comes from renewables went up to about 40% in 2021 compared to 7% in 2010, according to Our World in Data.
In response to the invasion, there have been calls to the government to end gas imports from Russia. Building all the planned solar and wind projects alone can replace the Russian gas imports, according to an analysis from Carbon Brief.
The UK’s leading renewable energy trade association, RenewableUK has said that Building additional onshore wind farms can help remove UK’s dependency on fossil fuels.
Is wind energy the best solution for the UK’s future, then?
The UK is located in one of the most favourable locations in the world for wind power. Acknowledging the strength, Prime Minister Boris Johnson has said he wants the UK to become “the Saudi Arabia of wind”.
The North Sea is the home to the world’s largest wind farm and together with the other wind farms across the country, wind energy contributed to nearly a quarter of the country’s electricity consumption in 2020. Thanks to wind energy, the year was the greenest year on record for Britain, according to a report from National Grid.
However, the wind doesn’t always blow. While the cold winter of 2021 increased the energy demand all over Europe, warm and windless months in the summer did not produce a consistent amount of electricity. This highlighted the need for other sources of energy such as solar, hydropower, nuclear and energy storage, according to Hannah Bloomfield, a researcher in Climate Risk Analytics.
What is the plan for the future of the UK’s energy?
The UK has made a commitment to reach net-zero emissions by 2050 to tackle the climate emergency.
In the green industrial revolution plan set out by the Prime Minister, the UK set ambitious goals. The first among them is to produce enough offshore wind to power every home by 2030. The following goals include advances in using Hydrogen, Nuclear, electric vehicles, Carbon capture, etc.
In response to the Russian invasion of Ukraine, the UK will also consider all possible options to increase its energy supplies according to a spokesperson of prime minister Boris Johnson. The opposition Labour leader, Kier Starmer has called for the government to invest in nuclear and renewable energy sources and insulate homes.
Method and Data
The charts and data used in the analysis are available here.