UK Prime Minister Lizz Truss, who assumed the leadership role earlier this week, has introduced a sweeping plan to freeze consumer energy costs and expand domestic oil and gas production.
The actions come as the UK and much of the rest of Europe grapple with record-high energy prices that have been exacerbated by recent Western sanctions against Russian gas imports.
“This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options,” Truss said in her announcement of the new measures to the UK Parliament on 8 September
Truss emphasized in her remarks that UK energy policy has not done enough to shore up domestic supply over the past decades. “I will end the UK’s short-termist approach to energy security and supply once and for all,” she said.
She added that need to step up domestic energy production is also a response to the “weaponizing of energy supplies” by Russian President Vladimir Putin “as part of his illegal war on Ukraine.”
In 2021, the UK imported from Russia 4% of its gas supply, 9% of its crude oil, and 27% of its coal. But by June of this year, the UK reported that it successfully ceased all energy imports from Russia.
In addressing the domestic supply challenge, the UK government will reverse its almost 3-year-old moratorium on onshore shale- gas development. Truss said exploration companies will be able to seek approval for shale projects “where there is local support.”
The UK government signaled back in April that it was poised to lift the ban on hydraulic fracturing operations which was imposed in 2019 over concerns on induced seismicity.
Truss added that permitting shale-gas development in the UK may result in tight-gas production in as little as 6 months from now.
Additionally, she said a new oil and gas licensing round will be held as early as next week with the hopes of issuing more than 100 licenses in the UK North Sea where production peaked in 1999.
Freezing Prices Before Winter
To address soaring energy prices as temperatures begin to drop, the UK government will on 1 October limit average gas and electricity bills for households to no more than £2,500 (~$2,875) per year for the next 2 years.
The government said this “energy price guarantee” will save each household an average of at least £1,000 ($1,150) on top of other subsidies. This nullifies a previous plan which would have seen the UK price cap for consumer energy rise by almost 80% in October.
Price caps will also be extended to businesses, charitable groups, and public institutions such as schools for 6 months to help offset winter energy costs. Following this period, more targeted support may be extended to the most vulnerable sectors, including hospitality and pubs.
The UK government said some of these businesses and organizations are facing the potential of seeing energy prices soar by more than 500% in the coming months.
To safeguard against potential liquidity problems among wholesale energy retailers, the UK will also establish a £40 billion fund with the Bank of England.
The prime minister also said the energy policy will promote the development of hydrogen, solar, and carbon capture and storage projects. Also included is an initiative to place the UK on track to source up to 25% of its electricity needs with nuclear power by 2050.
Truss said renewable and nuclear energy providers will use new contracting schemes to reflect their cost of production. Currently in the UK, the electricity generated from renewable and nuclear sources is tied to the price of natural gas.
