UK customers are "stuck" with high household energy bills for the foreseeable future, particularly as volatility in wholesale gas prices has been further exacerbated by the crisis in Ukraine, believes Greg Jackson, founder of Octopus Energy.
Jackson, who is chief executive of a British renewable energy group boasting over two million direct customers, is quoted by Sky News as warning that costs are likely to rise even higher this autumn, amid fallout from the special operation to "demilitarize and de-Nazify" Ukraine carried out by Russia, one of the largest petroleum exporters in the world. Labelled “an invasion” by Washington and its NATO allies, it has resulted in sweeping sanctions applied to Moscow.
"The price keeps going up because we had a global energy crisis, exacerbated by the terrible war in Ukraine, and in the short term, the UK is stuck with these energy prices. Wholesale markets are incredibly volatile and we can't predict where they're going to go, but if they stay where they are we will see," he said.
Record surges in global gas prices had already resulted in a 54 percent energy price cap rise, implemented by regulator Ofgem on the most widely used tariffs on 1 April.
The hiked domestic energy price cap - the maximum amount that suppliers can charge customers for each unit of gas and electricity they use – has resulted in energy bills for some 22 million customers growing by around £693 ($913), from £1,277 to £1,971 (those on default tariffs paying by direct debit). Pre-payment customers have to face an increase of £708 from £1,309 to £2,017.
The Resolution Foundation think tank has warned that this could double the number of households driven into “fuel stress.” This term applies when at least 10 percent of a family budget is spent on energy bills.
The Office for Budget Responsibility (OBR) in its predictions for the economy has estimated that skyrocketing costs could hit the UK by October, forcing a reappraisal of the price cap, possibly elevating it by another 42 percent.
The founder of Octopus Energy is convinced that the British government will have to offer more support to struggling customers in the coming year.
"I really hope that over the summer the government watches the situation and is ready to step in with more support for customers if that stays the case."
The British government has already offered a £150 Council Tax rebate to households in Band D or below, and a £200 repayable loan to bill payers in October.
However, analysts feat these measures could fall far short of what is needed once Ofgem reviews the price cap in August.
"The cost of living crisis is a real issue and [government] will be looking at it alongside all the other issues. But I do hope that they recognise the impact these energy bills are going to have on people means that additional support could be provided when appropriate," Greg Jackson was quoted as saying.
Onshore Wind Farms
Greg Jackson voiced his support for calls to ditch planning obstacles to allow the construction of new onshore wind farms. According to him, local communities are prepared to support renewable energy projects if they are made aware that they will benefit from them.
A wind farm off the coast of Hartlepool in north-east England
© AP Photo / Frank Augstein
The energy expert believes that Britain needs to slash its reliance on hydrocarbons and turn its focus of attention on renewable sources of power.
"The way our energy system works is that if we're not buying Russian gas it will be diverted somewhere else. What we need to do as a society is start to wean ourselves off gas altogether."
He touted renewable electricity as offering a source of cheap energy “closer to home.”
"So certainly, if in the short term we need to find more sources of gas from the North Sea or wherever, what we need to invest in for the medium and long-term future is dramatically more electrification through renewables," stated Jackson.
Octopus, he said, is currently building onshore wind farms across Europe and the UK, but removal of subsidies and introduced changes to planning laws, conceived by the Conservative government in 2015, are hampering the process.
This comes as UK prime minister Boris Johnson recently hinted that onshore wind farms will not figure significantly in his upcoming energy strategy, reported Financial Times.
Speaking at the House of Commons liaison committee, Johnson said:
“Renewables are fantastic and offshore wind – and I stress offshore wind – I think has massive potential. But so does nuclear.” Nevertheless, Johnson’s allies were cited as saying that the PM was “open to looking at onshore wind.”