The energy crisis is a failure of politics

8 January 2022

2:35 AM

8 January 2022

2:35 AM

Many of the thorniest problems of politics come down to the same thing: timeframes. Big problems generally require solutions that take a long time to develop and implement. But the decision to do this must be made by politicians who work to much shorter timetables: news cycles measured in days and weeks, ministerial appointments that last months, and elections that are never more than a few years off.

The approaching pain of rising energy prices is a case in point. It may well be surprising and new that European wholesale gas prices rose by 800 per cent last year. It is neither surprising nor new that the UK depends for much of its heat on importing gas bought on volatile international markets. The equivalent of around half of the gas we import is burned in boilers to heat our homes.

Also not novel is the fact that we don’t have enough storage capacity to stockpile gas as a (limited) hedge against price fluctuations. A search of Hansard, for instance, shows that opposition MPs have been pressing government ministers on this issue for most of the last couple of decades.

(There lots of examples, but to pick one at random, here’s Stephen Crabb MP back in 2007: ‘Does the Minister agree that as the UK becomes steadily more reliant on imported natural gas, we will need substantially more gas storage facilities to provide a buffer against the risk of supply interruption?’

Likewise, British homes are poorly insulated, meaning we must burn more gas to stay warm. Again, this is an issue where successive governments have failed to make enough progress, even though they all know it’s part of the long-term answer to the energy price problem. (The number of homes being lagged or otherwise upgraded collapsed during the last decade, for instance.)

Building more storage and lagging more lofts would have little tangible effect on the next quarter’s gas bills, and therefore limited importance in the context of public opinion and election results. Boris Johnson’s government hasn’t been in office very long, but even in that context it’s done pretty poorly on implementing long-term solutions to gas use and reliance. The failure of the Green Homes Grant, set out in this Public Accounts Committee report, is a dismal example.

That failure was hardly new, of course: earlier governments have also tried and largely failed to institute insulation schemes and similar. My suspicion is that these schemes fail not because they are inherently flawed or impossible to deliver but because they ultimately lack political importance. Generally, if a prime minister makes a project a priority and is prepared to throw public money at it over several years, it will have tangible results (as well as, in many cases, waste and inefficiency). But things like lagging and fixing draughty windows are slow and boring and never get such focussed and sustained political attention.

Instead, politicians faced with short-term public demands to make energy cheaper reach for short-term answers. Some of these are just wasteful — cutting VAT on all energy bills, for instance, which would allocate scarce resources to lots of people — who don’t really need it. And some are downright harmful, by reducing the resources allocated to weaning Britain off gas.

That would be the long-term effect of starting to unravel the system of levies applied to energy bills to help fund things like insulation and low-carbon energy generation and use. Ofgem, the energy regulator, reckons these add around £160 a year to an energy bill of £1,300.

Some Conservative MPs dislike these levies, in some cases because they dislike the wider Net Zero agenda. Joining the chorus calling for levies to be removed are a couple of energy firms, who say the money concerned should be raised from taxes instead. This sounds fine in principle, but in reality would mean that long-term energy efficiency and decarbonisation would have to fight for funds alongside every other call on the Treasury’s general funds. It’s all but inevitable that politicians taking a short-term view would allocate fewer resources to lagging lofts. And that would only exacerbate our underlying problem of gas dependence.

Insulation is part of the only real solution to that problem: reducing demand for and reliance on gas. The next part of that solution is ensuring that fewer homes need to burn expensive, volatile gas for heat. In large part, that means installing heat pumps, which run on electricity rather than gas. Here again, we find a short versus long issue. Installing millions of heat pumps will take time as the market and infrastructure needs time to develop. To give just one example, consider the heat installation workforce: how many plumbers do you need to fit those millions of heat pumps? What skills and training do they need? Will they get that training, and if so, where from?

These are, frankly, boring questions. Answering them will not attract much public attention, nor change many votes at the next election. Nor will it make much difference to energy prices this spring. All of which helps to explain why the government has so far done too little to answer them.

Perhaps those questions will, in time, be answered. Boris Johnson has, to date, shown impressive (and under-remarked on) commitment to the Net Zero cause in the face of scepticism from some of his party colleagues. Will he remain resolute as energy prices rise and the cost of living crisis bites deep?

Advocates for Net Zero would do well to raise their game about now, making more forcibly the argument that decarbonising home heating isn’t so much about saving the planet as about saving Britain from international gas markets. (This isn’t the only self-interested reason to go green: there are jobs and exports to be had here too if Britain cares to seize the opportunity.)

Energy bills and the squeeze on the cost of living is a symptom of a long-standing malady. We should hope for politicians who are able to see this problem in equally long terms and treat the cause, not the symptoms.

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