Lessons from a crisis: renewables as the solution to our energy security

For the second time in four years, households are bracing themselves for another expensive winter to come. And, once again, the déjà vu is hard to ignore. Despite repeated shocks, the UK remains exposed to volatile fossil fuel prices, with little to show by way of structural reform. This has prompted a familiar split in the political debate.

On one side are those arguing that energy security can only be delivered by extracting every remaining drop of North Sea oil and gas, doubling down on a model that has shaped the energy system for decades. On the other are those making the case that the only credible route to security lies in accelerating renewable power and electrification.  

This week, the government has come down in the latter camp, recognising that, although the North Sea supports a wide array of skilled workers, it is a declining basin, and the future lies in renewable energy which will provide an increasing range of skilled work long into the future.

There are too many linked announcements to list in detail here but by far the most transformative is the action to begin ‘decoupling’ the price of gas and electricity. If you’ve spent any time in the energy sector, it won’t take long for ‘marginal pricing’ to come up in conversation, this is the mechanism by which the price we pay for energy is set by the highest priced source in the pot, normally gas. This link is gradually reducing as more renewables come onto the system, meaning the amount of gas we need to ‘top up’ and meet peak demand is falling over time, but the government has taken action now to speed this up and bring bills down earlier.  

Although not a full decoupling, the government will be offering new, voluntary, long term fixed contracts to renewable energy generators not already on fixed contracts and, to encourage uptake of the scheme, it has raised the windfall tax on all electricity generators from 45 per cent to 55 per cent, cutting the incentive for legacy renewables operators to keep being paid higher prices linked to gas. Details are still being worked through, particularly around market design, but the direction of travel is right.

Other announcements include: a temporary increase to the Boiler Upgrade Scheme (BUS) for households heated by oil or LNG, £90 million in new funding to build and expand heat pump factories in the UK and an expansion of renewables across the public estate. Each of these measures supports the drive to electrify our economy, which is essential to reap all the benefits of renewable energy.  

It’s been a long road to get here so it’s important to set out why this is happening now. Previous crises were framed largely in terms of dependence on specific suppliers, most notably Russia. But, today, there is a growing recognition that all fossil fuel supply chains are inherently fragile.

The Iran crisis shows the chokehold that a small strait, that most of us were unaware before, can have on our everyday lives. This fundamentally switches the debate to one that explicitly links our security with our energy supply. And energy security is no longer an abstract concept, we are seeing the problem directly through our bills. 

It exposes a persistent myth: that increasing domestic oil and gas production would meaningfully lower energy prices. More domestic oil and gas production will make no difference to UK energy bills. North Sea oil and gas reserves are extracted by international companies and are too small to influence the price we pay which is determined not by the UK but by the global market.

But political context also matters, as we head into the May elections and experience a complex mix of domestic crises and concerns, we are pleased that growing our renewables industry, which has long been a cross party supported national endeavour, is increasingly seen as the foundation of our security as much as our climate ambition.

But these announcements alone won’t solve the problems people are experiencing with the cost of living. The government should also protect the most vulnerable from short term price rises. Options at its disposal include removing more levies from bills, alongside fast tracking plans to underwrite affordable finance for domestic installation of solar, batteries and heat pumps. These would give households more agency to control their own energy security.

Lessons from the crisis in the Gulf are stark but clear. Fossil fuels expose us to risks we can’t control. Renewables reduce them. Doubling down on clean energy is the only credible route to affordable resilient energy supply, as well as being a good environmental choice. Now we need to keep the momentum up.