UK spent £50 billion extra on gas since Ukraine invasion, say analysts
The UK has spent more than £50 billion extra on gas since Russia’s invasion of Ukraine, a new analysis suggests.
Wholesale gas prices exploded after the invasion and have been in a volatile state ever since, with many British households now burdened with much higher bills.
The analysis, carried out by the Energy and Climate Intelligence Unit (ECIU), estimates that the UK paid between £50-60 billion more for wholesale gas in 2022 than in a typical pre-pandemic year.
British households have been hit harder by the current crisis than in any other western European country, according to the IMF, because of the UK’s dependence on imported gas.
Gas is used to produce around 40% of the country’s electricity as well as to heat 85% of British homes, which are among the least energy efficient in Europe.
Analysts at ECIU said the impact would have been less severe if the UK was further ahead with its net-zero policies of improving energy efficiency in homes, building more onshore wind and installing more heat pumps.
Dr Simon Cran-McGreehin, head of analysis at ECIU, said: “As the IMF has pointed out, the energy crisis hit UK households harder than those in other western European countries because as a nation we’re incredibly dependent on gas. The price of gas is largely set by international markets, so the only way to protect yourself is to use less.
“The onshore wind ban has been one of the barriers to this. We’re also running behind places like Sweden, Poland and Estonia on installing electric heat pumps. As renewables and heat pumps proliferate, less imported gas is needed, which in turn benefits our balance of payments and energy security.”
ECIU’s analysis used data from the Department for Business, Energy and Industrial Strategy to estimate non-domestic gas costs.
While wholesale prices have fallen in recent weeks, consumer prices are still high because they are based on trades made last year at very high prices and are unlikely to come down soon because analysts are still wary of market volatility.
Alethea Warrington, energy campaigner at the charity Possible, said the cheapest and quickest way to reduce people’s energy bills outside of a windfall tax would be to change the planning laws around onshore wind.
The Government is currently consulting on local support after lifting David Cameron’s 2015 ban on subsidies.
Ms Warrington described the Government’s reliance on gas as “stupid” and “unhelpful”, and said a lot of people support onshore wind and the need to achieve net-zero.
She said: “It’s frustrating that the Government is quite willing to give these huge tax breaks to companies that want to drill for more oil and gas but they’re not willing to let communities – which have already done the local outreach and got people on board – have proposals for projects that would be being beneficial to the local community.
“They’re not able to go ahead with them because they’re just sort of snarled up in a planning system that’s not fit for purpose.”
Labour has said it would rip up the planning laws around onshore wind and shadow climate change secretary Ed Miliband has previously criticised the Government’s target of installing 600,000 heat pumps a year by 2028 as “way short of where they need to be”.
Octopus Energy CEO Greg Jackson said in an interview with the Telegraph last week that the company has designed a heat pump which can be installed for the same price as a gas boiler.
Heat pumps are an alternative to gas boilers and use a network of water pipes to channel heat from underground into homes.
Dr Matthew Trewhella, CEO of heat pump manufacturers Kensa Group, said: “Heating is responsible for a third of the UK’s greenhouse gas emissions.
“Currently, 24 million homes in the UK are heated by gas boilers, and this number is still rising. With under 27 years to remove gas boilers in line with net zero targets, new gas heating systems need to stop being installed now and be replaced with low-carbon heating alternatives at the rate of one million per year.
“Heat pumps offer far greater efficiencies than gas boilers, meaning you get more heat for the energy used. Gas boilers use around 1.2 units of energy, often imported, for every unit of heat they produce.
“Whereas Ground Source Heat Pumps can produce four units of heat for each unit of electricity used and produce no carbon emissions if combined with a renewable electricity source.”