9 minutes read
UK energy prices are soaring, and they show no sign of decreasing any time soon.
In fact, they're predicted to continue rising - especially in 2022. UK energy regulator Ofgem is set to announce an increase in the energy price cap on 7 February 2022, which is forecast to be as high as 50%.
This means that the maximum amount energy companies can charge customers will go up to £2,000 a year.
But the UK is not the only country suffering from this energy crisis - many other European nations are experiencing sky-high prices too.
Want to learn more about how the UK compares to the rest of Europe? We're here to shed a little light on the matter.
What's on this page?
Is there an energy crisis in Europe?
Yes - big time. European countries are facing the highest prices for gas and electricity in history, which is subjecting many nations to economic damage, possible blackouts, and freezing homes.
This crisis has hit Europe as a whole, but the impact on each country's electricity price is varied, since they all have different energy mixes.
One of the biggest factors fuelling the energy crisis is that gas suppliers - mainly in Russia - are providing fewer gas imports to European countries than usual. This means any countries that rely on fossil fuels to power homes will need to pay more than they're used to.
Italy, for example, relies heavily on natural gas and coal - together these account for roughly half of its annual electricity output. As a result, the price of energy here has increased steeply to €216.72 per megawatt hour. Meanwhile, Norway - where hydropower accounts for around 90% of electricity generation - has seen a lower increase.
Germany is particularly struggling with the energy crisis. Despite suggesting early on that the government wouldn't need to intervene, the country is now having to find new ways to support vulnerable households from the exploding prices.
Although 40.9% of Germany's energy supply was powered by renewables in 2021, this figure was much smaller compared to the year before because of 'depressed wind production'. On top of this, energy consumption in Germany has actually increased.
And to top it off, Germany followed through with its promise of closing nuclear power plants in a bid to switch to cleaner energy.
All of these factors have come together to make Germany more reliant on fossil fuels.
How does it compare to the UK?
Europe is having a tough time - people are struggling to warm homes and governments are having to intervene. But the UK seems to be having a particularly tough time handling sky-high energy prices.
There are a number of reasons why Britain might be worse off than some other European countries, including:
- Natural gas is heavily relied on
- There is limited capacity for storing gas, which means increased reliance on imports
- Most important nuclear plants are not working at full capacity
- Calm weather has starved the grid of wind power
The result? Overall, the wholesale price of gas increased by 250% over the course of 2021. And since roughly 85% of all UK households rely on gas boilers to keep warm during winter, the majority of the country are feeling the effects.
Are governments supporting people enough?
A handful of countries, like Italy and Spain, are calling for joint action at the EU level, encouraging joint agreements and strategic stocks of natural gas.
But as well as addressing the central issue, governments are having to think of ways they can support households - particularly vulnerable people.
We've noted some of the biggest examples below.
France
Although France isn't struggling as much as Germany or the UK, its government has introduced various initiatives to help the French public afford to heat their homes.
French Prime Minister Jean Castex has announced a cap on the price of gas until April 2022, and has promised to limit the increase in regulated tariffs to 4% for the whole of 2022.
The government also announced plans for a one-off €100 payment to the 5.8 million households that already receive energy vouchers.
On top of this, a fuel voucher and a reduction of the electricity tax rate are also being discussed.
Germany
As a way to help vulnerable households, the German government announced a reduction on the Erneuerbare-Energien-Gesetz (EEG) surcharge - a levy on the price of electricity - from 6.5 to 3.72 cents on the wholesale price per kilowatt-hour of electricity.
In response to the crisis worsening in the New Year, minister for environment and consumer protection Steffi Lemke told Reuters she will "clamp down on suppliers who try to profiteer from contract expiries, competitor insolvencies, and people moving house".
Germany's economy ministry also has plans to establish a so-called digital 'solidarity platform', which means gas can be made available to those who need it most in times of scarcity.
The UK
The UK introduced two initiatives during the energy crisis:
- Household Support Fund - A one-off payment of £115, which is available to residents who are eligible for Council Tax Support and are in receipt of Universal Credit at a level that is below the threshold for free school meals and/or free prescriptions
- Warm Homes Discount - This one-off £140 discount can be used to help pay for your electricity bill anytime between October and March. Anyone on an income below £16,000 with a member of the household being either under 5, disabled, or over 62 will be eligible for this support. You'll also need to provide evidence that you receive Universal Credit or Employment and Support Allowance (ESA)
However, many experts are calling for more support to be given. To kick-start the year, 25 charities - including Save the Children, Age UK, End Fuel Poverty and Greenpeace - have called for urgent government action to tackle the energy bills crisis.
Although these two schemes offer a combined £255 of support, it won't even cover two months' worth of energy bills for many homes, given the energy price cap is set to go up to £2,000 (£166 per month).
How did the energy crisis happen?
While there are many factors at play, a lot of people are pointing their fingers at Russia - a major gas supplier.
Fatih Birol, the executive director of the IEA, directly blamed Russia's behaviour for the record-high energy market prices in Europe. He said the historic low gas storage levels across Europe were largely thanks to Russia's state-owned gas company, Gazprom, which has sent about 25% less gas than usual to Europe over recent months, despite a surge in demand after 2020's economic slump.
Other suppliers are also struggling to supply enough gas. Ofgem revealed that "there have been periodic issues with Norwegian and Russian pipelines, which has reduced gas imports from these major suppliers." And considering Norway supplied 55% of the UK's imported natural gas in 2020, this has hit the country hard.
But there's much more to it than that.
One reason why we have less gas than normal is that we used a lot of it over the winter of 2020/21, which lasted far longer than usual. It was the coldest April in the UK since 1922, and the coldest in Europe since 2003.
The UK is also having to compete with more countries buying gas. Normally, in this circumstance, the UK would have purchased more liquefied natural gas (LNG) than usual to make up for shortfalls in other energy sources - but global demand has ruled out this option.
For example, various Asian nations (including China, Japan, and South Korea) have bought up huge quantities of LNG over the past year, in an effort to transition their energy supply from coal to gas. China alone imported 27% more LNG in the first half of 2021 than it did in the same period of 2020.
The increased demand in these countries saw European LNG imports fall by 19% during the first six months of 2021.
Want to learn more about factors impacting Europe's energy crisis? Check out our article on the 5 Key Reasons Behind the UK's Gas Price Increases.
Will energy prices go down again?
There's no telling how long this energy crisis will continue, but one thing's for certain - it won't be going away any time soon.
Mark Bennett from Energy Helpline suggested: "Given how turbulent the energy market has been in the last six months, it is difficult to predict what will happen in the latter part of next year. And while energy costs do usually come down during the warmer summer months, current trends suggest it won't bring much respite to household bills in 2022."
But what goes up, must come down, right? Not necessarily. Chris O'Shea, the chief executive of British Gas owner Centrica (the UK's largest energy supplier) has said there is no reason to think that gas prices would start to fall again "any time soon".
In fact, O'Shea predicted that we might be stuck with these prices for two years before we see prices decrease.
Summary
It's a worrying time for many households in Europe. Whilst the energy crisis has hit countries differently, Germany and the UK seem to be having a particularly hard time.
Although the UK government has intervened with new grants, many are still questioning whether this is enough to help vulnerable people get through the winter.
Beth Howell Writer @Bethany_Howell_
