Mini-Budget: Energy package to cost £60 billion reveals Kwarteng
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The UK could spend a staggering £473billion on fossil fuels by 2050, but the Prime Minister has been handed a blueprint to slash the costs that Britain would have to pay for international gas decarbonising its economy, according to a new report.
The study by the IEEFA claims an alternative energy pathway could knock a staggering £100billion off the bill Britain may to fork out to its foreign gas suppliers over the coming years and decades. If it continues down the current route advocated by the Government’s climate advisors, then billions of pounds could leak out of the economy, threaten the security of supply and leave Britain exposed to volatile markets, the report adds.
The Climate Change Committee, the Government’s climate advisors, called for the UK to phase out gas emissions by 2050, in what it calls an ambitious target to limit greenhouse gases and reach net zero. It says this can only be done with clear, stable and well-designed policies to slash further emissions across the economy are implemented now.
But according to the IEEFA, this target may not be ambitious enough. In fact, leaving it this long to completely cut ties with gas could come at an enormous cost, its report warns.
By following a different pathway, the National Grid ESO’s “Future Energy Scenarios – Leading the Way” pathway, the report argues this will slash volumes of expensive foreign gas that need to be imported, which in the UK is expected to remain above pre-pandemic levels for most of the decade and is likely to be hit with carbon taxes in the coming years.
The report also warns focusing too much on gas could scupper the opportunity to invest significantly in renewable power generation, which it argues would protect consumers from future energy supply scares and skyrocketing prices.
By switching to National Grid ESO’s pathway, which involves the electrification of heating and efficiency measures, the report claims Britain would be able to meet its net zero target while ensuring energy security, boosting long-term employment and productivity, developing local and export supply chains, and slashing the trade deficit, the report adds.
The pathway offers a roadmap to slash natural gas demand by 400 billion cubic metres (bcm) by 2050. This marks a huge 27 percent drop from the CCC’s “Balanced Net Zero Pathway”—the same as 12 years of net UK gas imports, based on 2020 levels.
Andrew Reid, IEEFA guest contributor and author of the report, said: “There is no economic case for sustaining gas demand at levels suggested by the CCC’s Balanced Net Zero Pathway, which will leave the country vulnerable to price fluctuations.
“The UK is in a strong position to speed up the deployment of indigenous renewable generation capacity and support investment in local infrastructure while avoiding huge economic outflows through the purchase of international gas supplies.”
“Adopting a pathway to 2050 that minimises the UK’s reliance on fossil gas will shield the economy from the risk of high-emission, high-cost energy imports, and it could avoid some of the impacts we are seeing now, with millions of people facing fuel poverty and potential shortages in the UK this winter.”
It comes after gas prices soared as a result of Russia’s war in Ukraine and Vladimir Putin’s supply cuts to Europe. While the UK only got four percent of its gas from Russia, much of the gas Britain imports from countries like Norway, Belgium and the Netherlands was more costly due to the volatile market, having a huge knock-on impact on UK billpayers.
While the Government announced a £60billion energy support scheme, along with a huge tax-cutting package, it appears Westminster is going on a spending spree that will require vast amounts of borrowing to cover the costs.
But the energy bailout will only put a pause on soaring bills in the short-term, with the crisis laying bare the urgent need to ramp up homegrown energy to boost security and energy independence. While it is argued that this can be done with renewables, critics of net zero say that the grid is not ready for these projects, while maintaining that gas, which is cleaner than coal, must be used as a transition fuel as the UK gradually weans itself off fossil fuels.
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And while the UK does plan to ramp up its renewable energy capacity, current restrictions are reportedly slowing the rollout. It comes after reports emerged of developers facing delays of up to a decade to connect new capacity to the electricity grid, which could pose a huge threat to the Governmnet’s net zero pledge.
While the UK plans to more than double its existing renewable generation capacity by adding 50 gigawatts of offshore wind by 2030, 70GW of solar by 2035 and 24GW of nuclear by 2050, developers have said they may have to wait six to 10 years to connect to the regional distribution networks due to constraints on National Grid’s network.
Catherine Cleary, a specialist engineer at consultancy Roadnight Taylor told the Financial Times: “The majority of large developers are now seeing construction-ready projects being delayed as a result of long queues and excessive charges to get access to the transmission system. Although there are proposals for new infrastructure, the lengthy timelines for this threaten to derail the net zero targets.”
The Climate Change Committee has also claimed that current policy is insufficient for even the existing targets.
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