UK's Energy Crisis. How did we get here ?

 Gas prices in the UK has been on the rise since the start of year 2021. It is expected to further increase with the cold winter ahead. To make matters worst, it might lead to the collapse of multiple energy suppliers and raised fears of factory shutdowns and soaring bills.

The chart below shows the increase in the Gas Prices in the Wholesale Market during the first 9 months of year 2021. The Y axis is depicted in pence per therm, while the X axis shows the dates during the year.

As shown above, Gas prices in the UK have tripled during this year to 180 pence per therm from 60 pence per therm at the start of the year.  This has affected energy suppliers in all forms spanning from home energy suppliers to heavy industry suppliers. And at the receiving end stands the households, farmers and factories. There are fears that some energy suppliers will go bankrupt unable to pass the increase to the buyers, while the end users will be burden with un-affordable bills.

With the fears of a colder winter, there are three main factors which have contributed in creating this energy crisis in the UK. 

1.   Firstly, it is mainly due to Russia’s refusal to increase gas supply to Europe (which in turns supplies to the UK) despite high demand. Some analysts say Russia is holding back supplies to speed up approval for the newly built Nord Stream 2 pipeline running directly from Russia to Germany.

2.   Secondly, China’s high demand for energy, with the post covid economic recovery. Instead of increasing the supply to Europe, Russia has turned towards China with more supplies.

3.   The third reason is the UK’s heavy reliance towards gas fired power plants for electricity generation. UK has been pushed for gas powered electricity for the following reasons.

a.      The ageing Nuclear Power plants been forced to undertake regular maintenance

b.      A main power cable which imports electricity from France was destroyed due to Fire.

c.       Slowing down of UK’s wind turbines with less wind experienced over the years.

Due to these reasons, Government is facing a heap of problems with unbearable energy prices badly affecting UK’s post covid economic recovery and may badly impact their popularity among the masses.