The UK is experiencing an unprecedented energy crisis. With wholesale gas prices at record highs, concerns about industry shutdowns are increasingly being voiced across sectors. As energy suppliers work to avoid financial collapse, some have reportedly employed dubious approaches to survive.

For Palladium’s Managing Director, Jose Maria Ortiz, the latest energy crisis isn’t necessarily a surprise. “This is a clear example of the world’s high dependency on fossil fuels and yet another indicator that the current energy models aren’t sustainable.”

“But this isn’t just a climate issue; it’s now a social and economic issue. We have the technologies to transition to clean energy and to less energy consumption without impacting our quality of life; we just need the political will to implement them,” Ortiz adds.

At the industry level, meanwhile, glassmakers are the latest energy-intensive sector to call for the government to intervene, as they say rising gas prices are pushing them to focus exclusively on their bottom line. This could have disastrous impacts for the climate, as the cost of greener solutions (such as waste-to-energy plants) are put on hold, while factories consider leveraging heavy polluting fuels that had previously been abandoned.

Steel and chemical/fertiliser sectors have already witnessed closures, resulting in ripples across supply chains in the UK, including agricultural. The Energy Intensive Users Group trade body has used these examples as rationale to call for exemptions from measures designed to help fund renewable energy and penalise carbon emissions.

With COP26 on the horizon, the time is right to focus on action, and double down on the progress made to date. Isolated from the European Union, now more than ever before, the UK needs to be proactive in engaging partners to take forward action on protecting and restoring the environment.

The crisis is clear, but what about the solutions?

Energy Innovation

Over the last 30 years, British governments have grown the economy by 78 percent while managing to cut emissions by 44 percent, indicating that green growth is real. Taking pride in the UK’s pledge to reduce carbon emissions by 78 percent by 2035, Alok Sharma, COP President-Designate, asserted that the UK has been leading the way towards a low carbon future for some time.

One of the express goals of COP26 is to accelerate the transition from coal to clean power. In 2012, 40 percent of the UK’s electricity came from coal.

Today, that figure is less than 2 percent, demonstrating clearly that change is possible. But now, with a crisis underway that threatens this progress, how will the government respond?

Already the UK has been forced to temporarily fire up coal power stations, paying millions of pounds to plug some of this power shortfall. Only time how temporary the measure is.

As Ortiz adds, the current crisis in the UK cannot be an excuse to go backwards. “The crisis should be a call for accelerating global net zero commitments with bold investments in new renewable sources, energy efficiency, and decentralised and smart networks.”

Supply Chain

As global economies begin to recover from the fallout of the pandemic, increasing production levels once again, countries across the northern hemisphere have been scrambling to secure gas supplies. A simple economic condition of increased demand and decreased supply following a long, cold winter in 2020-21 that depleted gas storage levels, the supply chain issue isn’t specific to the UK. What exacerbates the problem for Britain, however, is low gas storage capabilities (less than 1 percent of gas stored in Europe is within the UK), as well as ongoing staff shortages in heavy good vehicle (HGV) drivers.

Britain’s exit from the European Union has been named as one of the key reasons for the shortage in the UK, but industry experts note that problems in the industry are deep and exist across Europe.

Towards Net Zero

A key focus of the COP26 negotiations will be to finalise the rules needed to implement the Paris Agreement, called the ‘Paris Rulebook’. Integral to the Rulebook are three key areas: carbon market solutions, transparency, and motivation, driving ambition from governments across the globe.

“Renewable energy is the way to leave the energy crisis behind and move towards net zero,” notes Ortiz. “In the meantime, social measures to support vulnerable communities will be needed to avoid energy poverty this winter, but as COVID-19 demonstrated, the government can help those in need when temporary shocks distort the market.”

Achieving consensus to deliver on the Paris Rulebook will not deliver net zero entirely. But what it will support is the collaboration and partnership needed to move towards a resilient, sustainable, net zero economy. Let’s hope that the immediate crisis faced doesn’t distract from this critical work.

For more information, contact info@thepalladiumgroup.com.