Russia war anniversary – UK gas bill has now topped £100bn during gas crisis

Since the start of the Russian invasion of Ukraine on 24th February 2022, two years ago, the UK has spent an estimated £85bn on gas, an additional £60bn.

Overseas gas producers have received around £50bn from UK customers during the gas crisis to-date [2]. The North Sea Transition Authority is clear that North Sea production will continue to decline whether or not new drilling takes place [3], so payments to foreign importers will increase in the coming years unless the UK switches away from gas to more renewables, heat pumps and home insulation.

Jess Ralston, Energy Analyst from the Energy and Climate Intelligence Unit said: “Despite 1,000 Terawatt hours of gas coming out of the North Sea since the crisis began, household bills still shot up. Prices are set internationally so more drilling won’t protect homes from high bills next time an international crisis comes along.

“What would have helped is more British renewable energy and insulating homes. A lack of investment over the past decade and recent Government U-turns on policies such as warm home standards for landlords is leaving households vulnerable to volatile prices with 13% of homes now in fuel poverty [4]. The fact that domestic gas use has gone down points to houses making difficult decisions between eating and heating.

“The switch to heat pumps that run on electricity would also help, not least with the UK’s energy independence by reducing the amount of gas we need to buy from foreign suppliers. Here again, Government appears to be dithering.”

As energy bills have increased, energy consumers have sought to save money by reducing energy use. Household gas demand has fallen by 15%, as has the amount of gas being used to generate electricity. Demand for gas from industrial and non-domestic consumers has also fallen by 5-10% [5].

Over the same two-and-a-half year period, the UK’s indigenous gas production stood at 1,000TWh [6]. Gas prices are largely set by international markets, so in spite of this UK-based production, gas consumers still faced very high prices.

Previous research from the ECIU has found that the costs of not having switched away from gas-dependent technologies to net zero technologies such as heat pumps and solar panels in homes has cost the average household £3,750 over the last two years [7].

In 2022 the International Monetary Fund stated that the UK is the country worst hit by the gas crisis in Western Europe because of our high dependency on gas [8]. Since then there have been a number of opportunities to reduce gas dependency that have not been seized, and other choices made which actively increase gas demand.

For example, in September the Prime Minister scrapped tighter energy efficiency standards for the private rented sector, which may result in nearly 3 million privately rented homes not being fitted with energy-saving measures like insulation [9] which could cost them up to £8bn. This increases the UK’s gas demand and keeps household gas bills high. In addition, the Government’s energy efficiency schemes are flatlining [10], with 2023 expected to see the lowest number of installations since 2012.

The Government also failed to secure any offshore wind bids in the latest Contracts for Difference renewables auction, due to low strike prices and a limited budget pot. This could cost consumers £1bn per year in missed bill savings, by having 5GW less offshore wind capacity [11].

ENDS