Yahoo Finance City comment: UK energy crisis should be wake-up call for Boris Johnson
It’s right for the Government to help the energy industry deal with soaring gas prices but it will strike many as too little, too late.
The UK is facing a perfect storm that has sent energy prices soaring and pushed the retail market into crisis. The exact combination of drivers - an unusually long winter and hot summer, a low wind year, a global surge in demand for gas, and a fire on a power line between France and the UK - makes the current situation a ‘black swan’ event.
But the government can’t say they weren’t warned. One frustrated executive says the sector has been “screaming into the void” for years about the sustainability and security of British power. Another accuses Ofgem of being “asleep at the wheel” in the run-up to this crisis.
“The retail sector has been vulnerable for some time,” says the executive. “Some of the metrics of what we think of as sustainability were wrong.”
For years, the retail market has been a political football. Energy providers themselves have had little voice in the debate. The only thing that mattered was keeping prices low — a sure-fire vote-winner. But a focus on price only has led to under-investment and left many companies dangerously weak.
This crisis should be a wake-up call for Westminster. Even after this acute phase passes, fundamental issues will remain. The Government’s approach to Net Zero is disjointed and the UK remains hugely reliant on overseas energy — “Russian gas is still Russian gas,” as the executive puts it. Politicians need to make tough decisions on energy supply and how to square the climate circle with uninterrupted power.
For now, retail energy bosses feel like Cinderella, the executive says — the grim Hans Christian Andersen version rather than the Disney film. Executives hope for a happy ending but fear they will be told to keep scrubbing floors.
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