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Immediate energy efficiency improvements needed to meet net zero

Gareth Miller

Gareth Miller

Cornwall Insight CEO
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Energy Efficiency

Unless urgent measures are implemented to address growing financial pressures on households and businesses, then the foundation of popular consent to accelerate investment in new market structures may be damaged, notes Cornwall Insight’s CEO Gareth Miller. 

Before conflict erupted in the Ukraine, it was clear that a long-term restructuring of our energy markets to deliver net zero sustainably, with security was essential. We now see a focus on accelerating plans, as the current crisis imposes greater urgency. But results of strategies aiming at outcomes over periods of years rather than months will be cold comfort for those facing rising energy costs right now, and into next Winter.

The European energy markets have been in turmoil since Autumn 2021, with record high gas prices and ever-increasing consumer bills. The tragic events in the Ukraine have made the crisis ever more complex and pushed costs higher. Cornwall Insight’s own projections for domestic consumers have the Winter energy price cap set to rise to £2,962 for a typical consumer, noting that volatility in prices means that this could yet change.

Net zero remains the consensual destination of choice for our energy policy for all political parties, and the current crisis is generally spurring European nations, including the UK, to examine how they can rapidly reduce dependence on imported fossil fuels from Russia. We currently await a meaningful UK government plan to deal with the transitionary pathway to a gas future that is compatible with net zero and secure and affordable in light of the big shifts in geopolitics.

However, it remains vital that there is also as much focus on the more practical and pressing challenge of consumers in the here and now, as there is on the prospectus for the shape of the market by the end of the decade. As the Chancellor’s spring statement approaches, the opportunity opens up for Government to think about some coordinated, immediate and pragmatic actions:

People: One of the biggest levers available to us to reduce exposure to gas, even in advance of energy efficiency measures or boiler replacement, is demand reduction. Some suppliers have stepped up activity in this area, but the government could also play a key role in driving behaviour change.

Partnership: In addition to reconsidering the balance between domestic and imported gas, we should be exploring a coordinated strategy with our European neighbours on Liquified Natural Gas procurement. This could factor in the diverse mix of energy infrastructure in the European landscape. We should also consider how we could use some more gas storage to cement our own resilience to short term stresses.

Pragmatism: Where there are low-cost and low carbon solutions (like merchant onshore wind and solar) that can be accelerated to reduce our dependence on fossil fuels even further in the near term then we should use them. But we cannot change reality and create platforms in six months that take five years or more of solid development to deliver. We also need to make best use of what we have to reduce short -term security and cost concerns, including looking at how coal stations could be used to provide additional reserve next winter.

Paying: And vitally, expensive bills for households and businesses have spillover effects for the economy more generally. The budget presents a great opportunity for HM Treasury to develop and then share measures for increased support where it is most needed. Without this confidence generally in energy policy, which needs to be maintained as we continue the net zero journey, we may be vulnerable.

As we move forward and look towards the next few winters, there will need to be realism and flexibility in thinking on the energy crisis. We must find the balance between the pragmatism that the current geopolitical situation demands, and a resolute commitment to delivering net zero and an affordable, secure energy future that long-term subsequent generations will no doubt expect.

The progress towards net zero to date has already contributed to our ability to reduce our dependence on fossil fuels, but a reliance on gas will persist for years to come even under the most optimistic scenarios. We need to be creative and pragmatic about what that means for how we source, store, transit and pay for energy, including but not limited to gas, as time and context evolves.

We have been calling for this for some time, but there really does now need to be an honest dialogue with consumers about the profile of costs for them. There are extraordinary pressures arising from persistently high energy costs, but consumers are also asked to bear the broader costs over time of the underlying transition we all consider to be essential. Whilst the current situation is extraordinary, volatile commodity markets, and our exposure to them, meant that such a situation was always going to be a possibility. Whilst a low carbon future is ultimately better and cheaper than one dominated by fossil fuels, an open conversation on the fairest way of recovering the costs of getting there is long overdue.

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