Professor Sir Anton Muscatelli, Principal and Vice Chancellor, University of Glasgow
Whichever candidate wins the Conservative leadership election will not have their troubles to seek as they open their first red box in Downing Street. Skyrocketing inflation, war in Ukraine and the very real possibility of destitution for millions of citizens over the winter will doubtless plague the new Prime Minister’s mind – and standing at the cross-section of these problems is the crisis in the energy market.
Politicians often lament facing policy dilemmas, but this is an issue so thorny that we are instead facing that three-pronged problem – the trilemma. The government must consider how best to reduce energy costs to households when so many will struggle to pay, ensure our short, medium and long-term energy security at a time when the Russian invasion of Ukraine has truly highlighted the precarity of current arrangements, and how best to manage the transition to Net Zero in the aftermath of COP26 and as the very real consequences of climate change are beginning to hit home for a UK public now experiencing drought and 40 degree temperatures.
In the immediate term, politicians will be focussing on managing the impending crisis this winter, and any efforts to do so will not come cheap. The three main opposition parties in Westminster, Labour the SNP and the Liberal Democrats, have each independently settled on the necessity of a freeze of the price cap – the cost of such an intervention for six months, according to Labour, standing at £29 billion. Clearly, this is an astronomical sum which Paul Johnson of the Institute for Fiscal Studies notes is an investment on the scale of the furlough scheme during the pandemic – and raises the important question of how long this measure would be necessary for, and what the ultimate cost would be? Not even the most optimistic observer would expect the war in Ukraine to be over within six months, and so this measure would offer only the most temporary respite or a prolonged investment on an almost unimaginable scale.
Liz Truss and Rishi Sunak, on the other hand, have thus far resisted the political and public pressure to intervene around the price cap, and are instead focusing their policies on promising either tax cuts or more help in benefits, which would not target additional money to those who need it most. Income tax cuts don’t help the poorest and are not linked to the size of the energy bills in each household.
The scale of the impending crisis should by now be readily apparent, but is hammered home by a recent report by the National Institute of Economic and Social Research. It finds that 530,000 households in Scotland (21 per cent) will run out of savings by 2024, while a further 710,000 households (28 per cent) will have savings which are less than two months of disposable income, and will thus be vulnerable to future price increases. A subset of these will of course not even have enough income to pay for food and energy bills.
This demonstrates, in my view, two things.
Firstly, that while many will suffer financially as a result of price increases, the scale of the suffering among the lowest earners will be intense – which means this is where the bulk of any financial assistance must go to prevent a genuine social catastrophe in the UK.
Secondly, this crisis is not just for the coming winter but could be here for at least the medium term.
So while the short-term help which has been the focus of the public discourse thus far is completely necessary, there is an urgent need for a parallel discourse around how we ramp up resilience in our energy systems while making the transition to Net Zero.
Renewable energy will of course play a central role in this, with Scotland in particular enjoying significant natural resources ready to be tapped in areas like wind power. But, even in Scotland, the wind does not always blow, which would leave us with a problem in baseload capacity. Every MW of wind power installed requires at least 3 MW as back-up to fill the gaps and keep the lights on when there is not enough wind power available – and until now that gap has primarily been filled by gas, which in the aftermath of Russia’s invasion of Ukraine, is a real problem.
The challenge in the medium term then for Scotland and the UK is to develop storage solutions and enhance baseline capacity, at the same time as boosting our renewables capacity. Modular nuclear energy is one potential solution, although the potential safety pitfalls of nuclear make this potentially problematic and politically tricky. Another is investing further in hydro energy, a clean, long-term solution and a strong back up to wind-power.
However, the best chance to unpick the energy trilemma before us perhaps comes in the emerging field of fusion energy, an almost limitless clean energy technology which fuses atoms together in plasma in a controlled way, with none of the negative by-products of either fossil fuel burning or nuclear fission technology. Energy experts at the University of Glasgow are currently working with the local council on a bid to host a fusion energy prototype at Ardeer in North Ayrshire, which would put Scotland at the forefront of this exciting technology and make a major contribution to plugging the gaps with an entirely clean source of energy.
The energy trilemma is not going to be solved this winter – at best we can mitigate its impact on the poorest members of society and ensure people are not driven into poverty. But with the right medium to long term choices now we can shore up our energy security, boost supply, reduce costs, and progress towards Net Zero more quickly.
Fusion energy offers us our best chance to quickly, efficiently and relatively cheaply untangle the trilemma – and we need bold leadership in government to grasp the opportunity before us.
This article first appeared in the The Times on 2 September 2022