The global reliance on Russian oil and gas imports has long driven price increases and quickly sent ripples across energy markets following Russia’s invasion of Ukraine.
UK reliance on Russian hydrocarbons is relatively low compared to the EU and other western countries, with 4% of gas and 8% of oil currently sourced from Russia. The EU imports 40% of Russian gas and 27% of oil. Alongside the US, the UK Government is moving to ban Russian oil imports, confirming that Britain would phase out oil imports by the end of 2022 and exploring a total ban on Russian gas.
Increasing UK generation
Due to this urgency, the UK Government has shifted its narrative on security of supply away from a focus on “tackling climate change or reaching net-zero targets”, towards a recognition that UK clean energy generation can provide stability and free Britain from the impacts of volatile global energy markets.
A new energy security strategy is anticipated imminently, and early statements and predictions indicate that the focus will be on increasing renewable generation via widespread changes to planning laws across Britain. Plans for onshore and offshore wind, solar power, and an expansion of new nuclear are all expected to be central to the announcement.
It seems the current priority is on stabilising global energy markets, with Boris Johnson meeting with Saudi Arabia and the United Arab Emirates this week to discuss securing oil supplies and the possibility of the Gulf states increasing oil production.
There is also a push from some Tory MPs to lift the moratorium on fracking for shale gas, with the possibility that the new strategy may encourage further research into fracking. However, this is unlikely to happen in the short-term and the majority of ministers support the acceleration of clean energy generation.
In October 2021, Boris Johnson committed to all of Britain’s electricity being generated by clean energy sources by 2035, which could now be brought forward. In meeting current net-zero targets, the UK would reduce gas use by 65% by 2035 and almost 100% by 2050.
Advisors to the government have again requested support for energy efficiency measures to reduce demand for gas heating in homes and businesses, an increase in the installation of low carbon heating technologies like electric heat pumps, and faster deployment of renewable generation. The industry is already experiencing an acceleration of green hydrogen and the rapid increase in fuel prices could incentivise more people to move towards electric vehicles, which should in turn increase pressure for ensuring accessibility to charging infrastructure.
Despite the exciting prospect of more support for UK-based low carbon generation, there are wider considerations to ramping up development in the short-term. For example, the supply chain for heat pumps is still under-developed and the number of installers is far below what is required to meet an increase in demand. Large-scale renewable generation is often a complex process, even with a reduction in red tape, due to the ecological and community considerations, and many UK solar panels are sourced from China. Grid-scale battery storage will be core to maximising renewable generation and reducing the costs of the electricity system, however, this burgeoning pipeline of projects requires a smart flexible energy system to reward demand shifting.
A new energy strategy will no doubt tighten UK commitments to achieving net-zero emissions, but policy changes and funding arrangements are still required to provide long-term certainty in the sector.
A new energy strategy must ensure security of supply, affordability, and an acceleration towards net-zero targets. Cutting our reliance on imported oil and gas will certainly go some way to achieving this, but there needs to be a careful balance between the short-term need to provide stability and the necessity of the ongoing low carbon transition.
What immediate steps is your organisation considering to reduce the impacts of volatile market pricing and ensure security of supply? Have you seen an increase in interest for energy efficiency and renewable energy projects since the invasion of Ukraine?