The UK Energy Crisis: Escalating Energy Poverty and Pausing Frozen Produce Production (With Comment from Cat Smith)

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In what has been called a ‘perfect storm’ for the energy sector, the UK has been hit by a gas shortage which has caused wholesale gas prices to rocket, fueling concerns about shortages of CO2. The price of wholesale gas has spiked by 70% in the past month and quadrupled over the past year!

This could be attributed to an increased post-pandemic global energy demand by countries like the UK and China (a key driver of worldwide energy prices) and also the cold 2020-21 winter, which ravaged gas reserves in the Northern Hemisphere.

Around half of the UK’s electricity is generated by gas-fired power plants – an energy source that has been leaned on more so recently after one of the least windy summers since 1961, issues with imported energy from France and the closures of nuclear power stations for unexpected maintenance. Around 85% of UK domestic heating is gas powered, and with fuel poverty already on the rise, an energy price spike is something that many – who are already forced to choose between either food or heating – will be unable to cope with (especially at the same time as the cut in universal credit by £20 a week.)

Business secretary Kwasi Kwarteng, has effectively denied both the problem, and the government’s responsibility, perpetuating a belief that the market will recover without government intervention, even if this means some smaller suppliers going under. Kwarteng said that there is ‘no question of lights going out, [or] of people being unable to heat their homes.’ But, of course, this assumes that everyone can afford an increase in energy prices, and with people already struggling, it’s difficult to see how many will find the extra money, especially with the approach of winter.

The shadow business secretary, Ed Miliband, used his space at the dispatch box to remind MPs of the UK’s largest gas storage site closure endorsed by the privatised Centrica in 2017. He argued that this made the country more vulnerable to price shocks and global gas demand changes. Keeping gas in public ownership would have meant increased regulatory oversight, making the country better able to cope with gas price spikes like the current crisis.

So what’s the culmination of all these factors?

Suppliers are comparing recent events to the financial crisis of 2008.

Five energy firms have already gone bust, as lower prices were proven unsustainable.

The cap on energy bills, set by the regulator Ofgem, was already set to rise by 12% in October, taking the average UK energy bill to £1277 annually. The cap is reviewed every six months, and analysts are warning that if the gas price rise is sustained then the cap could increase again to up to £1500 by the spring of 2022. Customers who were with companies that have gone bust will be assigned a new company by the regulator, but they could see price rises of up to 40%.

Due to gas prices, two UK fertiliser plants have closed. An important by-product of these plants is carbon dioxide, used in the food and drinks industry for cooling meat and making fizzy drinks.

This is causing problems from Ocado who have been forced to reduce their delivery of frozen produce (for which dry ice is used) and have admitted a warning for a shortage of Christmas turkeys. After warnings from suppliers that it could be only a matter of days before reserves run dry, the government has reached a deal with plants in Teesside and Cheshire on Tuesday to resume production of the vital carbon dioxide. These two plants produce around 60% of the demand for CO2 in the UK, but the bailout is estimated to be costing the taxpayer ‘many millions of pounds,’ according to the environment secretary George Eustice.

All this drama really places emphasis on the fact that, just before the UK is about to host the COP26 summit in Glasgow, the UK is still embarrassingly at the mercy of gas for its energy supply.

As gas extraction from UK soil (through fracking and offshore platforms in Scotland) is already highly controversial and considered to be against the UK’s climate commitments, it is evident that for the UK to reduce its dependence on foreign suppliers, we must use less gas domestically and increase investment and use of more sustainable sources.

Lancaster and Fleetwood MP, Cat Smith – a Lancaster University alumna – provided a comment on the issue to SCAN:

“This winter is gearing up to be extremely challenging for millions of families across the country. I’ve already had correspondence from constituents deeply concerned by the increase in national insurance, the cut to Universal Credit – and now they’re about to be squeezed by a triple whammy of rising energy prices. Wholesale gas prices are now more than five times their level two years ago.”

“Four in ten households on Universal Credit are facing a 13 per cent rise in their energy bills in the same month as their benefit is cut by £20 a week. According to Citizens Advice, the £20 a week uplift would cover nearly a whole week of energy costs for a below average income household. Latest estimates suggest that the rise in the energy price cap means half a million more families will be plunged into fuel poverty.”

“Furthermore, shoppers could also face continued empty supermarket shelves as (on top of the crisis in distribution) it becomes unprofitable to produce the dry ice and carbon dioxide needed to store meat products. If the energy crunch continues, industry warns, a 1970s-style three-day week might have to be introduced.”

“This government needs to change course if we are to avoid plunging more families deeper into poverty. Cancel the cut, increase the minimum wage to at least £10 an hour, and urgently help households with the cost of rising bills including the option of extending the Warm Homes Discount and making the payment automatic.”

“It’s the Conservative government’s failures that have paved the way for the crisis that will hit families and businesses and as usual it will be the hard-working British people who pay the price.”

Kwasi Kwarteng has previously responded to talk of ‘a 1970s-style three-day week,’ saying that there is ‘no question of lights going out,’ and ‘there will be no three-day working weeks or a throwback to the 1970s […] Such thinking is alarmist, unhelpful and completely misguided.’ He insisted consumers will be protected by the energy price cap which ‘will remain in place.’

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