UK ‘dangerously underprepared’ for future energy crisis and price spikes, experts warn

The UK is “dangerously underprepared” and vulnerable to another energy crisis that would see price rises, a group of experts have warned.

The Energy Crisis Commission, which includes representatives from Energy UK, Citizens Advice and the Confederation of British Industry (CBI), said weaknesses in Britain’s energy system have been laid bare – supply, demand and targeted support for the poorest households.

The commission was launched earlier this year to review the impacts of the recent energy crisis on UK households and businesses after Russia’s war in Ukraine caused prices to skyrocket.

During the 2021-2022 energy crisis, Britain was one of the worst-hit countries in Europe, ranking second most dependent country on gas and fifth most dependent on gas for electricity against EU nations.

Household in the UK “paid the price” for the slow pace of improving housing stock, delays to new-build efficiency standards and missed opportunities to build more renewable power, the commission said.

The group found that on the supply side, Britain is still heavily reliant on gas for home heating and power, and urgently needs more home-produced renewable energy and storage capacity.

The UK has also failed to reduce energy demand, especially from forms of energy such as gas that show volatility when it comes to global shocks, the report found.

Housing in Britain is also badly insulated compared to other countries, the experts said.

The report also found that poorly targeted support schemes meant the poorest households suffered – ultimately pushing up the overall cost of the crisis for the UK and driving up national debt.

The impact has been “catastrophic” for some vulnerable households, it said, finding nine in 10 cut back their energy use and 7.5 million have hit fuel poverty.

For vulnerable firms, almost one in 10 (8 per cent) reported ceasing operations for some or all of their business and one in five (22 per cent) said that they would draw on cash reserves in response to higher energy costs, the paper added.

While the commission warned that there has been too little progress to build the UK’s resilience to future crises, it said the new Government is showing encouraging signs of tackling supply concerns, by pushing for growth in renewables, grid upgrades and carbon capture and storage.

Former MP David Laws, who chaired the commission, said: “Our view is that the new Government is now moving in the right direction and it will need to sustain this and do so at scale and pace in order to address the challenges we’ve had on demand.”

He added there is “still much more we need to do” on the demand-side and household support as he cited recommendations outlined in the report.

These included the Government developing a clear strategy for shifting away from fossil fuels, and increasing public investment in home energy efficiency to improve millions of cold, damp, unhealthy homes.

To ensure the better handling of a future crisis, the report called on ministers to improve the targeting of support for vulnerable households and businesses who could be hit worst.

The Government should also review regulations to protect consumers from supplier failure and develop an overarching plan to reduce the risk of future crises, including regular stress-testing of the UK’s reliance to price shocks and disruption, it said.