Will the lights go out? Will petrol be rationed? How to solve an energy crisis

Russia is the world’s second biggest gas producer and third biggest oil baron. World leaders are desperately trying to wean themselves off its energy exports — and Boris Johnson will in the coming days publish a new energy strategy to ease the country out of Vladimir Putin’s grip. In the 1970s the lights went out during the last major energy crisis. How can the prime minister avoid a repeat?

DRIVING DEPENDENCE

While we are largely self-sufficient in petrol, with some coming from Norway, half our diesel is imported and a third of that comes from Russia. Johnson has pledged to phase out imports of Russian oil by the end of the year, but finding immediate replacements hinges on negotiations with the Middle East.

Analysts believe there is now a significant threat that diesel will have to be rationed. Sales of new diesel vehicles have fallen in recent years but there are still 12 million diesel cars on the road, and the haulage industry relies on it.

A note issued by the Energy Aspects consultancy said: “Risks of energy rationing and ultimately a recession are growing by the day — something most policymakers seem to be ignoring or not grasping right now. If Russian oil is not integrated back into the market within the next few weeks, we are at a real risk of having to ration crude and products by the summer.”

By Friday it had revised its view and said diesel rationing could start as soon as April. Predictions of a shortage are more serious than last September, when petrol forecourts ran dry. At that time the government insisted there was no oil shortage, only panic buying.

DASH FOR GAS

About 40 per cent of European gas comes from Russia. This dependence is so dire that President Biden is considering sending heat pumps to Europe from the United States to reduce Putin’s influence, in a plan labelled “heat pumps for peace”.

The UK’s dependence is not quite so severe. We receive just 4 per cent of our gas from Russia. But the bigger issue is price. Because we are part of a global market any price shock hits us hard. The British wholesale price soared when Russia invaded Ukraine. It briefly hit 800p per therm last week — compared with 45p a year ago — before settling at 318p on Friday.

As customers we do not pay these prices directly, but eventually they will hit our pocket. Even before the Ukraine war, household energy bills were due to rise 50 per cent on April 1 to an average of £2,000 a year. By the time of the next rise, on October 1, the war will mean bills surpassing £3,000.

So would producing more gas domestically via the North Sea help? Not necessarily. Because we are in an international market, it would take a huge influx of gas to affect the price.

Gas remains fundamental to the economy. Even if we filled the country with wind farms, when the wind does not blow we need something to keep the lights on. This security could be provided by nuclear, or energy storage, or tidal power. At the moment it is provided by gas.

Jim Watson, a professor of energy policy at University College London, said: “We’ve got to manage the transition to net zero and managing the transition means managing the role of gas in the economy.”

But the North Sea, which has been the mainstay of our energy industry since the 1980s, is in decline. Only half the gas we use today is produced domestically, with the rest piped in from Norway or shipped from the Middle East and US.

“We’ve only really been self-sufficient for gas in two periods,” said Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit (ECIU). “Once was in the 1970s, when everything was nationalised and British Gas would turn the taps on and off to meet demand. And then in the 1990s, when the markets were liberalised and there was a huge upsurge in drilling to meet all that demand.”

Since then, however, much of our gas has been used up. Some 45.9 billion barrels of oil and gas have been extracted from the UK continental shelf since exploration began. Nobody knows how much is left, but the Oil and Gas Authority estimates there were just 4.4 billion barrels of “proven and probable” oil and gas remaining at the end of 2020. Of that, 1.3 billion barrels were gas, enough for roughly three years of domestic demand.

A further 2.1 billion barrels are thought to remain in licensed fields waiting for full approval, proposed new developments and what the authority calls “marginal discoveries”. So there may be an additional five years’ worth of gas left, if we can extract it. But by 2030 the gas may have run out.

The government is currently considering the exploration of six new fields. But, of these, only three produce gas, and those will only meet 2.4 per cent of UK demand by 2028, according to ECIU analysis.

Politics complicates the picture. The SNP, which before the 2014 independence referendum argued an independent Scotland could stand on its own thanks to the North Sea, has now switched its position. Nicola Sturgeon now opposes new exploration as part of a shift to a green agenda. On Thursday the first minister told Holyrood that it would be “impractical” to ramp up production, a policy opposed by the Scottish Tories.

MATTER OF FRACK

What about fracking, which was the focus of British hopes of an energy renaissance? Tory backbenchers and the former minister Lord Frost want fracking to be kick-started to extract gas from layers of shale below Lancashire.

Johnson last week announced he would look at “all options” to ease energy security concerns. But a moratorium on fracking has been in place since a tremor shook the ground near a well run by Cuadrilla in 2019.

A Whitehall source insists: “Until we have compelling evidence that this can be done safely, the moratorium will remain in place.”

TURN DOWN THE THERMOSTAT

So if fracking remains off the table, and the North Sea can only fulfil a dwindling proportion of our needs, how can we reduce our exposure to Russian gas? Instead of increasing supply, why not reduce demand? The International Energy Agency has already suggested that every home turn down the thermostat by one degree to save money. But if we better insulate leaky homes, we would need less gas to heat them.

According to ECIU analysis, the six million homes that have undertaken insulation work since 2009, such as wall cavity work or roof insulation, will save an average of £194 per year on their bills under the new prices. But insulation has been neglected by the government for a decade. Energy efficiency installations peaked at 2.3 million homes a year in 2012. Since then they have dropped 90 per cent. If a million homes a year could undergo work to upgrade from an average energy performance certificate (EPC) rating of band D to C, it would cut gas use by an average of 20 per cent. “That saving is made every year,” Cran-McGreehin, head of analysis at the ECIU, said. “We reckon that within about eight or nine years, you’d have cut UK gas demand by 4 per cent — the amount we are currently importing from Russia.”

GO FOR GREEN

Fossil fuels, campaigners argue, got us into this mess. Only by phasing them out will we cut the cord to Putin. Instead of chasing after gas, why not accelerate renewables?

Dr Simon Evans, of the Carbon Brief website, calculates that if the 410 solar projects and 239 wind projects awaiting construction were built, they would provide enough electricity to replace our Russian imports.

It is a lesson many countries learnt in the 1970s. Watson, the professor of energy policy at UCL said: “The oil shock led to some pretty substantial changes. Around the world governments tried to shift away from fossil fuels and oil towards something that was more resilient to future price increases.”

Denmark started developing offshore wind power, a sector in which it remains a global leader. Japan, which until the crisis relied on oil imports of 80 per cent, in 1974 launched the “sunshine project”, a massive investment programme in solar power. France started developing nuclear power, which now supplies three quarters of its electricity.

But if the oil crisis helped birth a clean energy revolution, it was a revolution that passed the UK by for some years. Cran-McGreehin said: “The UK response to the 1970s crisis was to forget about it, because it found North Sea oil and gas. We were complacent for decades and it is now coming back to bite us.”

The UK later embraced renewables, particularly offshore wind but a narrative has emerged in recent weeks which blames the drive to net zero for our poor energy security. By prioritising green energy, and neglecting gas supplies, the argument goes, we have handed Putin a strategic advantage.

Similar arguments are taking place around the world. Jason Bordoff, a former climate adviser to President Obama, said last month: “If climate ambition comes into tension with energy reliability or affordability or the security of energy supplies, climate ambition will lose.”

But in Downing Street scepticism about green energy has not taken hold, mainly because renewables are far cheaper than ever before. When David Cameron called for his officials to “get rid of the green crap” in 2013, the cost of new offshore wind was roughly £180 per megawatt-hour. It now costs less than £50. With gas prices at record levels, green power is now the cheaper bet.

Johnson is expected to accelerate renewables in the coming energy strategy, by easing planning rules introduced by Cameron which made it much harder for onshore wind farms to be approved.

Kwasi Kwarteng, the business secretary, believes that even taking environmental arguments out of the equation, clean energy is still a better option. “It is no longer about tackling climate change or reaching net zero targets,” he said last week. “Ensuring the UK’s clean energy independence is a matter of national security. Putin can set the price of gas, but he can’t directly control the price of renewables and nuclear we generate in the UK.”