Britons will pay exorbitantly for energy in coming weeks after the nation’s energy regulator announced a huge price rise.
British energy regulator Ofgem (Office of Gas and Electricity Markets) confirmed on Friday that energy bills would increase by a staggering 80 per cent to an average of £3549 ($6034) a year from October.
The energy crisis in Britain begs the question: Will Australia be hit with comparable price hikes?
Industry experts told The New Daily that although Australia had already endured large increases, the price surges were almost entirely unrelated.
Why is Britain in crisis?
The ongoing energy crisis in Britain is multifaceted, and caused by environmental and political factors.
One major cause is the nation’s heavy reliance on energy imports.
Britain imports nearly half its natural gas, which makes it highly vulnerable to price fluctuations.
The ongoing conflict in Ukraine has added to its energy supply woes, with neighbouring countries highly reliant on Russian resources.
But with Russian President Vladimir Putin continuing to slash European energy supplies, Britain is on the verge of energy ‘blackouts’.
This has coincided with a big spike in demand for energy as the country endured a summer of record heat.
The demand for energy to run air-conditioning hit a peak because British infrastructure has not been built to withstand high temperatures.
To make matters worse, Europe in recent months has experienced low wind speeds, which has affected renewable energy output.
Fuelled by this combination of factors, energy costs will have a huge effect on the cost of living.
As the median disposable household income in Britain is about £31,400 ($53,460) and energy prices are forecast to rise, widespread ‘‘energy poverty’’ is imminent, experts said.
People simply won’t be able to pay their bills, said Liam Wagner, associate professor in energy and environmental economics at the University of Adelaide.
‘‘Essentially, people can’t pay their energy bills, and they’re having to choose what to give up, obviously other things that they would normally consume,’’ Dr Wagner said.
‘‘When you have people who live in a modern society that have a sudden disconnection of an essential service, it becomes quite difficult for them to survive. You can’t refrigerate food, for instance. You can’t even get hot water.’’
The crisis has prompted a movement in Britain.
More than 120,000 Britons have pledged to withhold energy payments from October 1, unless the government and energy companies move to end the crisis.
The consequences of the surge in prices could be ‘‘catastrophic’’ in winter time, Dr Wagner said.
‘‘It’s dire. In the UK, going into winter, it’s going to be extraordinarily cold. I would say that would be close to catastrophic for some people,’’ he said.
‘‘That has a flow-on effect to other things, like, people can’t pay their mortgage, people can’t pay their rent. And then you start to experience homelessness because of energy prices.’’
What is British government doing?
The British government is under enormous pressure to fix the crisis.
But it is in a state of political paralysis due to the Conservative Party’s leadership contest following Boris Johnson’s resignation in July.
Britain’s two would-be prime ministers have clashed over how to best respond.
Liz Truss stopped short of outlining any specific plans, but gave a vague response, saying she would ‘‘ensure people got the support they needed’’.
Former chancellor and rival Rishi Sunak has pledged up to £10 billion ($17 billion) to help households with energy bills.
In the meantime, Dr Wagner said the government was doing ‘‘absolutely nothing’’ to resolve the situation.
‘‘I think they are in quite a politically stagnant situation at the moment until they elect a new prime minister,’’ Dr Wagner said.
‘‘The UK has been very willing to transform their energy sector into one that no longer uses much fossil fuels or any; particularly after leaving the European Union, they have still remained fairly pro-renewables.
‘‘Having said that, they obviously have a very deregulated market for both electricity and natural gas which can, in the circumstances, put extraordinary pressure on consumers and will drive a fairly steep increase in energy poverty in the United Kingdom.’’
Tony Wood, energy program director at the Grattan Institute, said the government needed to ‘‘step in further’’ – but it wouldn’t be easy.
‘‘Of course, as we did in Australia, having provided so much financial support through the COVID problem, the UK government isn’t in a position to continue to spend huge amounts of money subsidising gas either,’’ he said.
Mr Wood said it would be ‘‘very difficult’’ for the British economy to sustain the high prices.
‘‘I think that it’s going to be very difficult for the British economy to sustain high prices such as this, particularly for electricity and gas. And I think it will greatly affect their economic growth and their ability to emerge, sort of post-COVID,’’ he said.
“I suspect that’s going to have a very big influence on the next election.’’
Could this happen in Australia?
Australia faces its own energy affordability crisis but because Australia is a net energy exporter and Britain a net energy importer, the two nations are in very different positions.
Although the crisis in Britain is down to a lack of energy supply, Australia’s crisis is one of affordability.
Professor Wood said Australia’s energy market was far less vulnerable, and an energy crisis of the British scale would be highly unlikely any time soon.
‘‘Australia is in a very fortunate position where we don’t have that situation of being dependent upon other countries,’’ he said.
‘‘[Our energy crisis] is nowhere near as bad as it is in the UK. Nor is it likely to be because the fundamentals are quite different.’’
Dr Wagner said while a similar crisis was unlikely, the global diesel shortage brought on by the conflict in Ukraine would continue to push the cost of living upwards.
‘‘Diesel availability and prices is probably the main thing I’m worried about personally as an energy economist, because that affects everything in our [lives],’’ he said.
‘‘It does hurt. Diesel affects everything that we can see.’’
