Ministers are relying on an outdated energy security policy, leading academics have warned, as escalating tensions between Russia and western leaders propelled the gas market to record price highs.
UK gas reached a record closing price of 322.5 pence per therm on Tuesday, according to data from market price experts at ICIS, vaulting ahead of the previous high of just over 298p/therm set in early October this year.
A record was also set in Europe, as the benchmark market in the Netherlands rose to a record €127.45 per megawatt hour, according to ICIS data, breaking through the €116.75/MWh ceiling set in October.
The price spike was triggered by concerns over deteriorating relations with Russia, one of the largest suppliers of gas into Europe, which prompted international condemnation after massing 100,000 troops on the Ukrainian border.
The market surge came as the UK Energy Research Council (UKERC), a group of academics funded by the government’s UK Research and Innovation body, called for a review of the country’s energy security policy, warning ministers had been “complacent about the supply of gas for too long”.
Government policy, last updated in 2017, is now out of date and homes may face further volatility in the future, the UKERC cautioned, saying the gas crisis was “not just for Christmas”.
Mike Bradshaw, the group’s co-director and a professor at Warwick Business School, said government policy was based on a pre-Brexit environment which prioritised securing energy supplies over keeping costs down.
The government has treated gas use as a “default” necessity when low-carbon options are unavailable rather than setting a specific gas strategy, Bradshaw said.
“Reaching net zero will transform the way we produce and use energy but as we go through this transition we need gas by design, not the assumed position of gas by default,” he said.
The new record highs are likely to deepen Europe’s gas crisis which has already forced factories to close and caused scores of energy suppliers to go bust. In the UK, 26 suppliers have gone bust in the last four months, and households face rising energy bills this winter and through 2022.
The UK’s energy regulator, Ofgem, is poised to set out a series of new proposals to address the energy supply market crisis on Wednesday morning including tough new financial standards for energy suppliers and changes to the UK’s cap on standard energy tariffs.