When talking about the energy crisis, it’s best to start with renewables – specifically wind-powered energy generation.
Obviously, wind power is reliant on significant and sustained airflow, and over the past decade Europe has invested heavily in offshore wind farms and has reaped the benefits.
But last year Europe was hit by an extreme weather event – a lack of wind. It has continued into 2022 and is the lowest sustained lack of wind for 60 years.
In the European countries that generate the most wind energy (Britain, Germany and Denmark) just 14% of the energy generated in the third quarter of 2021 came from renewables. That’s compared to 20-26% in previous years.
In the UK, SSE turbines produced 32% less power than expected at a time when European gas prices hit record highs.
This brings us to the impact of gas prices and how that has had a knock-on effect on electricity.
Europe experienced an unusually long and cold winter at the end of 2020 and that in turn depleted its gas supplies. The capping of gas flows into Europe from Russia further exacerbated these shortages, leaving Europe facing the problem of how to replenish its dwindling stocks.
It’s a simple, yet pricey, issue of supply and demand.
This problem was very quickly passed to energy suppliers across Europe.
An energy supplier agrees to take a quantity of gas (or electricity) from the seller (at a future date) at a predetermined price. As a result of the pandemic (first year), the demand for gas and electricity was low because we all stayed home and many offices were closed. Some energy suppliers in the UK took the opportunity to lower their prices to attract customers while wholesale prices were exceptionally low.
For instance, in January 2021, gas was priced at £0.50p a therm.
By December 2021, due to the increase in demand but low supply, it had reached an all-time high of £4.50 a therm. Last week it was at the lower price of £2.23 a therm, which is still almost five times higher than the price 12 months ago.
The utility companies have been bearing the extra cost because customers had agreed tariffs at a much lower price earlier in the year, but that business model isn’t sustainable. In the UK alone, 29 utility companies have gone bust as a result. Meanwhile, France has told EDF to take a €8.8bn hit to protect customers.
So, we have low wind, an increase in gas prices and – because of the reduction of coal use – the UK and Europe have had to turn to their gas-fired power stations to generate electricity. This further pushes up the price of electricity.
In the UK, we have a price cap on residential energy bills, but not on business tariffs. This hit businesses hard, and there have been numerous reports of firms that had to stop producing commodities such as CO2 and nitrogen for the food industry because it was too expensive to run their operations.
Now the residential price cap is on the increase. The big energy companies have until now been absorbing the extra costs associated with gas and electric increases because their tariffs hardly changed, but someone must eventually pay the bill.
That someone will be the consumer.
It’s expected that the UK residential energy price cap will increase in April 2022 by more than £500 per year.
The think tank Resolution Foundation says these increases will push millions more households – around a quarter of the country – into fuel poverty.
So here we are. There’s no quick fix.
The problem can be solved, but it will take bravery and investment from business and government. Alpha 311 turbines are part of the solution, but so are solar energy, tidal energy and battery systems and a variety of other innovations developed by teams from around the world.
