June 17

How should the UK government handle energy problems in medium term?


The increase in the energy price cap has prompted concerns about the UK’s energy capacity and its ability to provide affordable energy to businesses and individuals in the medium term. 

While the government is looking to make substantial changes to energy production with a greater focus on renewable energy, in the long run, the price hikes indicate that more could be done to improve energy security and affordability in the medium term using mechanisms such as energy regulation

In this industry update, we are going to reflect on the UK government’s energy strategy and what must be done.

How should the UK meet its energy demand?

Some experts argue that a fully realised oil and natural gas industry could help the industry navigate a challenging few years.

However, the moratorium on unconventional drilling since 2019 has discouraged the search for new natural gas sources, which has seen the production of natural gas fall from 34.9 bcm in 2020 to 8.9 bcm by 2035. 

This has prompted concerns about energy security and affordability in the medium term despite the planned increase in renewable energy production. For instance, the UK currently imports part of its energy from foreign countries, which is more expensive than producing it locally. 

If the UK government is to be more self-sufficient in energy, then they would need to consider their stance on onshore energy production. 

The industry claims that the UK sits on shale gas that can meet domestic energy demands for several years. Even though the claim must be verified, expanding UK’s onshore production can arrest the decline in energy production and reduce GHG emissions from imports typically produced and transported using methods that are even more harmful to the environment than if produced locally.

Furthermore, the government can use energy regulation to make the transition to new production methods a smoother, less tumultuous experience. For example, the government can use regulatory reform to ensure financial returns to landowners, create sovereign wealth funds to channel tax receipts and provide support to lower bills for consumers and industry.

Devising a new strategy for energy production

While the UK government has ambitious plans for long-term energy production and consumption, there are still some concerns about meeting demand in the short and medium-term. 

Given that energy prices are rising, the government may want to reconsider their energy production methods to ensure that the industry is somewhat stable until the UK has achieved its goals of locally produced renewable energy.


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