The first lesson of the gas crisis is old and boring: the UK should get serious about insulating its leaky properties. If all homes that have energy performance certificate band D were upgraded to band C, the UK’s total gas demand would fall by 7%, and imports by 15%, the Energy and Climate Intelligence Unit calculates. Given the UK’s wretched record in insulation versus European peers, that sounds a small but easy win.
The second part – the supply side – is where the trickier stuff starts. The broad energy direction has been set towards nuclear and renewables, but there’s no getting away from the fact that gas will be in the mix for a long time yet. Virtually all transition scenarios imagine it, and you have to be an extreme optimist to believe UK consumers can quickly be converted to the joys of heat pumps.
Thus, from one quarter, comes a call for a fracking revolution under Lancashire. Readers of the Mail on Sunday at the weekend were treated to a blast in the form of Nigel Farage’s refrain about how “net zero is net stupid” and that the answer to our energy woes is homegrown shale gas. Prepare to hear more in similar style. As UK wholesale gas prices reach unheard-of levels, a well-resourced fracking lobby has reassembled.
It is therefore reassuring to know that the secretary of state for business and energy is having none of it. Kwasi Kwarteng wrote a sensible piece in the same paper that backed more homegrown nuclear and more renewables and pointed out the drawbacks with fracking. The gas would take a decade to arrive in volume even if the moratorium were lifted tomorrow. Local planning conditions in densely populated areas are severe; what works in Texas won’t do in Lancashire. One can add that the economics of UK shale are currently guesswork: having 50 years of theoretical reserves doesn’t mean it can all be recovered at commercially viable prices.
But here’s the rub. “We also need to back North Sea oil and gas while we transition to cheap, clean power,” said Kwarteng. On that score he is surely also correct. There is “a certain hypocrisy”, as the independent energy analyst Peter Atherton puts it, on the part of the opponents of North Sea development “in being anti-UK production when they know that all their own scenarios see the need for substantial amounts of gas into the 2030s.” Quite: if the gas is going to arrive anyway, best to get it close to home where environmental standards can be controlled.
It’s not a universally popular view, but it would be legitimate for Kwarteng to ask North Sea firms for projections of how much they could increase gas output over the next one, five and 10 years while we wait for extra renewables and nuclear capacity to arrive. Then it would be a matter of incentivising production (whether by contracts-for-difference or whatever) from a source that, unlike shale, offers certainty.
Since gas projects work on long payback horizons, we might find ourselves paying extra to turn off supplies in the mid-2030s to hit carbon-reduction targets, but that, unfortunately is the current unattractive position. Simple solutions do not exist, but the need to retain secure supplies plus broad consumer support for net zero targets persists. Investing in North Sea gas, as a backup to the drive towards low-carbon tech, looks only pragmatic.
Best optics? A clean break
The Conservative peer Greg Barker was adamant last week. “Whatever the optics,” he would not “shirk responsibility” by resigning as executive chairman of EN+, the aluminium giant founded by the sanctioned Russian oligarch Oleg Deripaska. He was thinking only about the company’s employees.
A few days’ reflection – or perhaps the sight of senior Conservative voices calling for his removal from the House of Lords – have prompted a rethink. Barker has tendered his resignation.
One cannot yet call it a clean departure, though, because in the next breath, EN+ confirmed reports that it was considering spinning off a chunk of its business, including the non-Russian operations of the core Rusal subsidiary. Barker, it seems, could re-emerge as head of the carved-out operation.
His high-profile resignation, in other words, could end up being more of a soft-shoe shuffle into a new role within a restructured entity. Maybe he wouldn’t be paid a salary of $4m a year in the new gig, as he was at EN+ in 2020, but we’re at the point in this saga where personal credibility demands a full exit. He should not have taken a job at a Deripaska-backed firm in the first place. Just get out altogether now.
