The writer is a former EU trade commissioner and UK business secretary
In retrospect, this energy crisis looked inevitable. To attribute this solely to Vladimir Putin’s invasion of Ukraine is simplistic. Rather, this is a longer-term tale of energy insecurity and under-investment. Western gas supplies have been left fragile by Europe not diversifying its energy sources, by Putin and Gazprom’s increasing manipulation of the European market over the past decade and by under-investment in oil and gas as the US shale boom has waxed and waned. This combination has caused gas prices to soar to 10 times the normal average, leading to record price rises for consumers and businesses.
This is not just an EU crisis — the UK has also been left exposed. The European Commission is focusing on reducing demand and, to an extent, continuing to let the market do so through high prices; the UK has intervened on prices with no clear plan on demand. Across European capitals, we have seen significant interventions in the market, from France capping prices to Spain and Portugal capping the price of gas for electricity generation. From Berlin to Zagreb, governments have spent eye-watering amounts — at least €700bn — on packages to cushion citizens and businesses from soaring gas and power prices.
As EU energy ministers gather this week, we are at a crucial inflection point in our efforts to tackle the energy crisis. One policymaker in the European Commission recently told me we are facing a two to four-year energy crunch, given heavily constrained global liquefied natural gas markets. The assumption is the US, Qatar and other non-Russian sources of LNG are not going to “ride to the rescue” anytime soon.
Governments on both sides of the Channel face a delicate balancing act this winter: to protect citizens and the economy in the short-term, while building a sustainable and sensible future vision for secure, affordable and clean energy.
As the UK’s business secretary during the global financial crisis, I know full well the political temptation to try to “go it alone”. But this crisis, like Covid, and the 2008 crash before it, requires solidarity. Meeting the challenges of security, affordability and sustainability requires the whole European political community to collaborate.
I welcome outgoing prime minister Liz Truss’s recognition at the European Political Community meeting in Prague this month that on energy, now is the “time to find common cause with our European friends”. But follow-up action is essential from her successor Rishi Sunak to avoid attention moving back to domestic interests. Take the de facto windfall tax set to be applied by Britain and Europe on renewable energy producers. If the level set in the UK does not mirror the EU’s policy, there is a risk this could divert future investment to Europe. On energy, Britain and Europe must learn to co-operate with each other again, for three key reasons.
Our interlinked energy markets will be vital for winter resilience. Interconnectors from France, Belgium, Norway and the Netherlands power 5mn British homes each year. Meanwhile, Britain is a crucial hub for LNG imports from the rest of the world, providing gas by pipeline to help the European continent refill gas storage supplies.
Second, the North Sea is Europe’s main indigenous source of oil and natural gas. Measures to boost domestic oil and gas production, providing climate compatibility checks are met, will help the continent shore up non-Russian supplies of hydrocarbons.
Last, our shared offshore wind resources will power the UK and Europe’s transition to net zero by 2050. The voluntary North Seas Energy Cooperation, made up of the commission, Norway and eight EU member states, has agreed to increase the capacity of offshore wind to at least 260 gigawatts by 2050. If the UK would signal its intention to rejoin this energy partnership, that would cement the North Sea’s potential as a global offshore wind powerhouse.
Winston Churchill’s exhortation to “never let a good crisis go to waste” feels in tune with the current energy turbulence. Through collaboration across the European neighbourhood, policymakers in Britain and the EU have a golden opportunity to secure a new era of European energy independence. Defeating Putin, achieving energy security, affordability and our net zero ambitions depend on it.