Government’s energy independence plan will leave UK ‘more dependent’ on imports

In order to avoid the UK’s gas balance of trade getting worse as North Sea production declines, the Government would need to accelerate deployment of insulation, heat pumps and renewables or face growing dependency on foreign gas, with net imports potentially rising by almost 60% by 2035 if no action is taken to reduce gas demand.

Accelerated deployment of net zero technologies could cut gas demand by two-thirds (65%) by 2035, and net imports by 55%. But with current policies lagging for insulation and heat pumps, and with the renewables sector facing barriers including recent tax changes, the UK could conceivably reach 2035 with just a 10% cut in demand and a 60% increase in net imports.

This analysis is based on forecasts by the regulator, the North Sea Transition Authority (NTSA), that expects gas production to fall by 55% by 2030 and 75% by 2035, even if new fields are drilled. [3] But with production costs rising, and industry body Offshore Energies UK warning that North Sea output could fall by 80% by 2030, [4] the case for reducing gas demand becomes even more urgent if the Government is to limit the UK’s import dependence.

Commenting on the analysis, Dr Simon Cran-McGreehin, Head of Analysis at ECIU, said: “The North Sea is an expensive basin to operate in. It’s also in terminal decline. Even if more fields are opened up, you can’t escape the fact that without shifting away from old-style boilers, we’ll end up more reliant on gas imports.

“Unless we ramp up deployment of technologies like renewables and heat pumps to reduce our over-reliance on gas, we face a huge rise in import dependence that will leave us even more exposed to international gas markets – and that didn’t work out very well for British households over the past couple of years.

“Europe and the US appear to have learned the lesson of the Russian invasion, deploying heat pumps at a much greater pace. It appears we haven’t learned that lesson, and those arguing against electric heat pumps are consigning the UK to worsening foreign gas dependence. Gas-based ‘blue’ hydrogen for home heating would drive up bills and leave us even more dependent on imports.

“The Government’s Energy Security Day plan had some of the right ingredients but not in the right quantities which will leave us burning more not less imported gas.”

Octopus and British Gas are now both offering to install heat pumps from £3,000, similar to the cost of a new gas boiler. [5] Heat pumps reduce bills, reduce exposure to international gas markets, and reduce air pollution. They are highly compatible with the millions of homes built in recent decades – and they work effectively for older homes, with high temperature models also entering the market. [6]

Home insulation rates plummeted a decade ago when Government cut support schemes [7] and have even fallen during the gas crisis.

The IMF has previously warned that UK households have been worst affected by the energy crisis because of our high dependence on gas for heating and power. [8]

The renewables industry has recently expressed concern that the Government’s recent tax changes and decision not to reciprocate tax breaks provided to North Sea drillers will slow deployment, as will planning regulations. [9] There is now greater competition for net zero investment, with the US Inflation Reduction Act and the European Union’s response, the Net Zero Industrial Act.

Recent ECIU analysis on heat pumps has shown the UK is lagging far behind Europe which is quickly accelerating deployment of technology with colder Scandinavian countries leading the way, and others including Poland and France seeing huge surges in sales. [10]

Businesses involved in the UK’s net zero economy are adding more than £70bn GVA according to analysis conducted by CBI Economics and The Data City, commissioned by ECIU. [11]