Renewables can limit the impact of surging global commodity prices09 Aug 2021
Energy is an essential service and it’s always difficult when prices are going up. This week Ofgem increased the energy price cap, reflecting the consistently high global gas prices seen in recent months.
Ofgem explained the hike was the result of ‘surging global fossil fuel prices’, with gas prices reaching a record high post-lockdown, resulting in a more than 50% increase in energy costs.
The average £139 bill increase serves to underline just how susceptible we still are in GB to volatile international commodity markets and how ultimately that can hit consumers where it hurts.
It also shows just how difficult it is to balance what’s often referred to as the energy trilemma: ensuring energy is affordable, reliable and sustainable.
But the answer is blowing in the wind – renewables can deliver on all three.
We have a rich, clean energy source on our doorstep. Renewables offer cheap energy security, indigenously produced, which in the long term will reduce our exposure to international fuel pricing whilst helping tackle climate change.
Few would deny we are in the midst of a climate emergency. When COP26 comes to Glasgow in November, we need ambitious global agreement on how we phase out more polluting forms of power and move to systems not dependent on fossil fuels and - by extension - volatile global markets.
Of course, there will be costs associated with this – but the devastating costs of inaction will be far greater in the long term and renewables hold the key to keeping the transition affordable.
Government support mechanisms brought forward huge investment in renewables, and that has driven down costs. We’ve recently seen record low auction prices for offshore wind, which is now the cheapest deployable large-scale technology in the UK.
Delivering renewables on the scale required, as well as integrating millions of electric cars and heat pumps, will require big investments in electricity networks to ensure they can facilitate this transformation. The good news is the latest proposals from network operators would see costs on household bills kept flat.
And businesses like ours are continuing to innovate, investing in new technology like carbon capture, long duration storage, floating wind, not to mention embracing digitisation across the energy industry. The pace of change in the next decade will continue as we extend the use of low-carbon electricity across the economy. If we do it right, this transition will minimise the cost to bill payers.
If we want to keep costs down, we need renewables.
If we want to have any chance of halting climate change, we need renewables.
If we want to keep the lights on, we need renewables.
We commissioned a report from LCP on how Great Britain can reach net zero without breaking the bank. It found five steps to cut carbon - and do it quicker and cheaper.
Firstly, going big on offshore wind will save the UK £7.3bn by 2050. As an island we have an abundance of clean, green renewable energy on our doorstep and we should use it to our advantage. We have a head start.
Secondly, we’ll still need gas as a transition technology for when the wind isn’t blowing and the sun isn’t shining, but new technologies like carbon capture and storage alongside hydrogen will support decarbonisation, particularly in hard to abate industry.
We can also use renewables more flexibly, shifting demand, deploying batteries, hydro pumped storage and green hydrogen to bank clean electricity. LCP modelled this as saving £4.9bn.
What’s clear is the electricity market must evolve to value all low carbon power equally and avoid building more new assets than we need. This can deliver one of the singular biggest savings with £19.7bn to be shaved off whilst a coordinated approach to offshore transmission would cut costs by £8.8bn.
That’s total savings of £48bn by 2050 and a huge 19.8m tonnes of CO2 avoided.
The short of it is that getting on with net zero now – in the right way - will save billions in the years to come and avoid storing up problems for bill payers down the line. Critically, it will also reduce our exposure to volatile global commodity markets by increasing our ability to produce clean, cheap and secure electricity on (or off) our own shores.
This is the time to lean into a green recovery. Invest in the green technology. And speed up the pace of change – if we’re to secure the long-term future of our planet.