Eastern Europe and what it means for the UK’s energy supply

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March 03, 2022

Russia’s invasion of Ukraine is an appalling act of aggression with terrible loss of life and the displacement of potentially the largest number of people in Europe since World War II.

One of the impacts of the aggression is likely to have a significant impact on the UK’s energy supply. Energy – especially oil and gas – is one of Russia’s main exports to Europe as it provides much of the continent’s oil and gas.

Main points to consider

Jhe UK does not import significant quantities of gas from Russia, despite its status as the world’s second largest gas producer (contributing 17% to global gas production in 2020). However, the current UK energy crisis is being fueled by rising global gas prices. The volatility of this market will continue to affect UK energy costs.

  • About 5-6% of UK gas imports come from Russia.
  • However, with Russia having withheld resources over the past two years, the UK has been exposed to the volatility of international gas markets – while our supply is unlikely to be affected, the price we pay for the gas is, leading to higher energy bills this year.
  • Many European countries have agreed that increasing the use of renewable energy is one of the solutions to dependence on Russian gas. prime ministers have confirmed that the UK “will end the dependence on Russian oil and gas which for too long has given Putin his grip on Western politics”. The UK will therefore have to reduce its gas demand or replace it with other sources. In the short term, our reliance on liquefied natural gas (LNG) is expected to increase, but increased global competition for this resource will drive up costs.

UK energy bills are therefore likely to sharply increased throughout this year as a direct result of the conflict in Ukraine and the sanctions imposed on Russian exports.

  • The UK energy price cap has been raised from £1,277 to £1,971 in response to rising gas prices. Gas counted for at least £500 of this increase.
  • Energy UK has warned that the price cap could rise again to £2,400 in October. The conflict in Ukraine has seen these estimates to get up at around £3,000again driven by global gas prices.

The UK government has made it clear that investing in renewables is key to mitigating price increases. The UK is already a world leader in renewable energy generation – continuing to invest in local energy will protect businesses and households from further price spikes.

  • As gas, which generates 40% of the UK’s electricity, remains set the price for all producers, higher gas prices also lead to higher electricity prices. These costs are felt by consumers and businesses.
  • Renewable energy, such as that produced by wind and solar power, is cheaper. Our growing use of these supplies has seen electricity prices increase at a much slower rate – 54% between April 2021 and April 2022 (gas prices have increased 97% at the time).

What can businesses do?

Since the start of the energy and gas crisis, the concept of increased energy efficiency has received additional attention as a means of reducing gas (and energy) consumption, thereby reducing bills. Reduce the amount of energy you consume on your premises will be vital for business in the immediate term. With gas prices expected to continue to rise, this will likely be the most effective way to keep bills down for some time.

  • In addition to considering switching to a renewable energy tariff, businesses can consider investing in greater energy efficiency of their premises in order to reduce their energy bills.
  • Due to the high cost of gas, it is likely that from April it will be cheaper operate an electric heat pump than a gas boiler for the first time.
  • Other measures such as hollow wall and attic insulation reduce gas demand, saving money on your bills.
  • Upgrading a building from Energy Performance Certificate (EPC) Band D, the average rating in the UK, to Band C, reduces heat demand 20% on average per building.
  • Upgrading all buildings to C-band reduce gas demand by 7% and net imports by 15%.

At the British Chambers of Commerce, we have compiled a list of ten things companies can do now to reduce their emissions. Taking steps to improve your energy efficiency will help you do just that, while reducing your operationsAl costs. Below is more information on energy efficiency measures you might consider.

The Heating Hub: lowering the boiler flow temperature

Euronews: How can consumers reduce their electricity bill this winter?

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