The energy crisis in the UK is showing no signs of stopping and prices of gas and electricity keep rising. That has made heavy industries worry about being able to cover the costs of their supply.
This week the government is supposed to outline proposals designed to navigate the way out of the crisis by investing in nuclear power, onshore wind, and solar power. While the strategy has the potential to help the UK deal with the crisis, energy-intensive industries worry that it does not support them enough.
Britain’s new energy security strategy
Britain’s new energy security strategy is supposed to be announced on Thursday.
As Russia’s invasion of Ukraine has led to countries around Europe facing gas shortages and increasing energy prices, expansion of homegrown energy in the UK is needed. One of the things that could get the UK out of the energy crisis is advancing nuclear energy.
In a conversation with the Sunday Telegraph, Business Secretary Kwasi Kwarteng said that ‘Britain could build up to seven new nuclear power stations as part of a radical expansion of homegrown energy following Russia’s invasion of Ukraine.’ He added that ‘There is a world where we have six or seven sites in the UK by 2050.’
As Reuters reported the new strategy ‘is expected to commit the government to supporting the construction of at least two new large-scale nuclear plants by 2030 in addition to small modular reactors.’
In addition to placing more focus on nuclear energy, the strategy aims to ‘make the UK a world leader in offshore wind,’ Pinset Masons writes. The UK government has a target of 40 GW of the total energy usage of the country coming from offshore wind by 2030. The new target represents an increase from the plan for 30 GW to be coming from offshore wind.
For the time being only 10 GW of energy in the UK is produced by offshore wind. And, as Pinset Masons adds, this is the largest installed capacity of offshore wind in the world. According to UK Wind Energy, the UK has the most offshore wind installations with 28.9%. It is followed by China with 28.3%.
To meet the target, as Pinset Masons wrote, ‘The government intends to double the capacity of renewable energy generation supported by its contracts for difference (CfD) subsidy mechanism when the next auction round opens in late 2021. It is also committing £160 million of investment to upgrade ports, infrastructure and manufacturing capability in areas where offshore wind generation is located including sites in northern England, Scotland and Wales.’
Meeting this goal is crucial not only to mitigate the impacts of the energy crisis and to bring down energy prices but also to support the development of a low carbon economy.
Impact of energy crisis on energy-intensive industries
Heavy energy users believe that the new strategy will not offer them any help in paying their energy bills. As the Guardian reported, ‘Earlier this month, Boris Johnson promised measures to “address the needs of British steel, British ceramics and the whole of British industry” but the business and energy secretary, Kwasi Kwarteng, told MPs last week that the government had already taken steps to support industrial firms facing soaring costs.
Against a backdrop of ballooning energy bills for strategically important companies and major manufacturing firms, energy intensive industries told the Guardian that the mixed messages had left them fearing they will receive minimal help, or none at all.’
Already in recent months there have been many companies that have gone out of business. And, as the prices keep increasing, it is likely that heavy industries will struggle to keep operating.
Heavy industries need a lot of energy to operate but they provide millions across the country with essential services. It is, therefore, important that the strategy takes into consideration not only the needs of small companies and domestic users, but also the ones of energy intensive industries.
Oil prices decreased after the United Arab Emirates-Iran truce
On Sunday the United Arab Emirates and Iran welcomed a UN-brokered truce that halts all the military operations on the Saudi-Yemeni border.
Up until now, the Iran-aligned Houthis have been fighting a coalition, which includes the UAE, in Yemen. The conflict has been going on for 7 years and this agreement is the first truce.
‘The Saudi-led coalition intervened in Yemen in March 2015 after the Houthis ousted the internationally recognised government from the capital, Sanaa, in late 2014,’ Reuters explains.
Thanks to the truce, which will last two months,x fuel imports into Houthi-controlled areas will be allowed and come flights will be operating from and to the airport in Sanaa, Yemen’s capital. Over the last 7 years of conflict, the situation in Yemen has turned into the worst humanitarian crisis in the world with tens of thousands killed and millions pushed into extreme poverty. Families across the country have been starving to death.
Conflict in Yemen explained
In 2014, Houthi insurgents, which are Shia rebels with connections to Iran and a history of violence, took control over Sanaa. They did that because they wanted to demand lower fuel prices and the formation of a new government. Unfortunately, the negotiations were not successful and their demands were not met so the rebels used force to make the former government resign.
Then, in 2015, a coalition of Gulf states led by Saudi Arabia started a campaign of economic sanctions and air strikes against the Houthis. Their intervention has been supported by the US while the Houthis have been receiving weapons and assistance from Iran.
Ever since, the fighting has been ongoing and it has intensified the Sunni-Shia division in the country. Now, more than 20 million people are in urgent need of assistance to survive.
Truce and oil prices
Right after the truce was announced, oil prices fell. There was a threat to oil supplies in the country so the agreement alleviated some of them. Additionally, as the war in Ukraine drove prices to almost $140 a barrel, which is the highest in about 14 years, there were concerns that it will negatively affect Yemen too.
As News Azi reported, ‘Brent crude futures fell 79 cents, or 0.8%, to $103.60 a barrel by 0037 GMT while U.S. West Texas Intermediate crude was at $98.45 a barrel, down 82 cents, or 0.8%. Both contracts slipped $1 when markets opened on Monday.’
The truce in Yemen can ease supply disruption concerns in Middle Eastern countries but it remains to be seen whether the two parties actually follow the agreement and do not break the ceasefire in the next 2 months.