In the UK, two more energy providers have gone bust - raising the total number to 12, and leaving a total of 1.5 million consumers behind in the UK. In Greece, the hefty energy bills have led to increasing prices throughout the economy, including groceries, all while European governments are rushing to provide reliefs for the burdened consumers. In the UK, the crisis seems to resemble the 1970s crisis, with food and gas shortages on the rise, but with the Business Minister denying the potential of history repeating itself half a century later. Nevertheless, we are seeing a surge in demand for energy as countries are emerging out of the COVID-19 crisis, and energy suppliers unable to respond. Due to our dependence on fossil fuels in our supply chains, this has led to shortages or price increases for products.
In an attempt to reduce the effects of climate-change, the EU’s carbon pricing scheme has also been a factor leading to the European energy crisis, with the cost of European carbon permits increasing from €30 per tonne to €63. To add to this, there have been massive wind-power shortages due to the lack of, well...wind, leaving unprepared governments in a state of shock when it comes to intermittency of renewables.
The current crisis is creating an ‘ideal’ backdrop for the upcoming COP26 climate conference coming up in November. Governments are now faced with the challenge of maintaining the status quo and hence subsidising the fossil fuel industry to prevent the burden from falling on millions of consumers, or letting the energy market collapse. Last night, the UK government chose the former and suspended competition rules from applying to the oil industry - allowing companies to share information amongst themselves. Governmental responses including rule exemption and price capping are making institutional commitments to net-zero frail.
The current crisis is also showing a deeper societal crack when it comes to green energy: our economy and system has not prepared us for the reality of price premiums in the energy sector, nor has it prepared us for the power saving efforts necessary to better establish the role of renewable energy in our economies. The lack of reliable alternatives, the increasing prices of ‘dirty’ energy sources lead to inflation, hurt consumers and also lead to an anti-environmentalist sentiment. The higher prices are a reflection of what energy pricing will look like in the process of decarbonisation, and leaders are running to patch up the potential of political fall-out.