Letters / Self-inflicted wound
The news that Shetland energy bills are forecast to average £10,300/year from next April is profoundly shocking.
The gas price is unprecedentedly high however its current price cap (14.8p/kWh) is a quarter that of electricity (51.8p/kWh).
Shetland, with no mains gas and widespread, all-electric heating, must therefore endure the worst of the crisis, forecast to put 24 out of 25 homes in fuel poverty (96 per cent).
Local fuel poverty rate could skyrocket to 96%, council analysis suggests
Why, then does gas push up electricity prices so much? Because the electricity market’s supposedly competitive daily bidding process leads to all bidders receiving prices close to the highest bid accepted.
Thus, coal or hydro bidders would receive almost the same price as gas bidders while incurring a fraction of the costs.
The higher the gas price the higher they pitch their bids, which sounds a lot like ‘price gouging’.
The gas price itself is determined by supply and demand and supply is currently short.
The 2020 Covid pandemic bankrupted producers resulting in shortages when demand recovered. The price rose rapidly in 2021.
Light summer winds reduced wind farm output, adding to gas demand while Russia, Europe’s main supplier, declined to help by increasing supplies.
In February, Russia invaded Ukraine and Western nations applied sanctions, reducing imports.
Next, a Texas export terminal fire cut gas imports from the US. Then Russia, retaliating to sanctions, cut gas supplies yet further.
Consequently, the price has soared to previously unimaginable highs and electricity generators are cashing in as described above.
Clearly, we are over-dependent on gas, especially, imported gas. And we are dependent on an aggressive, hostile country, Russia, for supplies.
Why did we allow that to happen, Russia has plenty of form – invasions of Georgia and Crimea, arming pro-Moscow rebels in East Ukraine and poisoning refugee dissidents and innocent bystanders in the UK?
Despite imported gas having three times the carbon intensity of domestically-produced gas, virtue-signalling governments banned shale gas extraction, reduced incentives and refused permission for new, conventional drilling projects.
The real, underlying problem is that we are still unable to run our countries without fossil fuels. Yet we have thoughtlessly painted ourselves into a corner, failing to develop our own resources and replace obsolete, conventional power plants which cannot be replaced by unstable renewables.
Westminster and Brussels are ultimately responsible. Successive governments have made a shocking ‘dog’s dinner’ of a once great industry.
Radical action is now urgently needed to undo their incalculable folly:
- Immediate, substantial customer support – £400 is derisory. Especially hard-hit places like Shetland will need extra support.
- Emergency changes to the electricity market to end price gouging.
- Incentives for new gas/oil fields and extending existing production lifetimes.
- Reverse shale gas bans.
- Build new, efficient, low CO2, conventional power plants.
- A comprehensive review of energy strategy/policy.
The new prime minister must act decisively to close this gaping, self-inflicted wound and ensure it never happens again.
John Tulloch
Aberdeen
