Energy boss says prices might rise this winteron July 3, 2023 at 8:14 am

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Governments may need to give energy bill help this winter, says the head of the International Energy Agency.

Woman changes temperature on boilerImage source, Getty Images

Energy prices could spike this winter forcing governments to step in and subsidise bills again, the head of the International Energy Agency has said.

If the Chinese economy strengthens quickly and there is a harsh winter, gas prices could rise, putting pressure on consumers, Fatih Birol said.

He added that governments should push for energy-saving and boost renewables.

However, a UK government spokesperson said energy bills are set to fall by an average £430 this month.

Gas prices soared after Russia’s invasion of Ukraine, driving up energy bills around the world.

A number of governments then stepped in with support for households, including in the UK, to try to soften the blow to consumers.

The IEA is an agency that works with governments and industry to provide data, analysis and recommend policies.

Mr Birol told the BBC’s Today programme that many European governments made “strategic mistakes”, including an over-reliance on Russia for energy, and that foreign policy had been “blindfolded” by short-term commercial decisions.

He said this winter “we cannot rule out” another spike in gas prices.

“In a scenario where the Chinese economy is very strong, buys a lot of energy from the markets, and we have a harsh winter, we may see strong upward pressure under natural gas prices, which in turn will put an extra burden on consumers,” he said.

The Chinese economy had been bouncing back after Covid restrictions were lifted, but recently its economy has been slowing down.

Ratings agency S&P Global this week cut its forecast for Chinese growth, saying “the risk is that its recovery loses more steam amid weak confidence among consumers and in the housing market”.

Investment banks including Goldman Sachs have also been cutting forecasts for Chinese growth.

Nevertheless, Mr Birol said governments including the UK should “continue to push measures to save energy, especially as we enter the winter”.

They should also push renewable technologies so they “see the light of day as soon as possible” and cut the time it takes for them to get permits, and look for “alternative energy options”, he said.

He said he “wouldn’t rule out blackouts” this winter as “part of the game”.

“We do not know yet how strongly the Chinese economy will rebound,” he said.

National Grid said last winter that short power cuts were a possibility – in the end, this was not necessary.

A UK government spokesperson said: “We spent billions to protect families when prices rose over winter covering nearly half a typical household’s energy bill, with them set to fall by around £430 on average from this month.”

Domestic gas and electricity bills in the UK fell at the weekend after a change to the energy price cap came into force, and a further, smaller fall is expected this winter.

However, with the annual energy bill of a typical household set to be about £2,000, costs are still much higher than the pre-pandemic norm.

Last week the head of Centrica, which owns British Gas, warned energy bills were likely to stay high for the foreseeable future.

Oil licences

Russia’s war in Ukraine led to a “gold rush” of new fossil fuel exploration, and the UK defied climate warnings by issuing a new licensing round for North Sea oil and gas.

More than 100 applications have been submitted to drill for new oil and gas in the North Sea.

This was at odds with international climate scientists who say fossil fuel projects should be closed down, not expanded.

They say there can be no new projects if there is to be a chance of keeping global temperature rises under 1.5C.

Mr Birol said “if the world is serious” about the “climate cause” then “we have to reduce the use of oil and gas significantly in the next years to come”.

If we can reduce consumption, existing oil and gas fields will be enough to meet declining demand, he added.

He said he has discussions with the chief executives of UK oil companies.

Mr Birol said he has “no problem” with oil firms making profits, but if they say: “I am going to increase my production by four million barrels per day, and my company’s strategy is in line with the Paris Climate Agreement – it doesn’t work, there is a problem here.”

The Rosebank field in the North Sea, which has the potential to produce 500 million barrels of oil, could be approved by the government within weeks.

The UK government said it was “committed to reaching net zero by 2050 and have already come a long way to meet that target, cutting emissions faster than any other G7 country while keeping the economy growing and with low-carbon sources like renewables and nuclear providing half of the UK’s electricity generation”.

But a spokesperson added “the transition to cleaner energy cannot happen overnight and we will continue to need oil and gas over the coming decades, as recognised by the independent Climate Change Committee”.

Emma Pinchbeck, the chief executive of Energy UK, which represents British energy companies, told the BBC’s Today programme that the long-term solution to high bills “is to invest in renewables and energy efficiency to make sure that we’re not reliant on volatile international gas”.

“We expect that investment in more infrastructure in renewables and energy efficiency and alternative technologies to deliver cheaper bills in the long run… and that’s why it’s so important that we move quickly, particularly with increased international competition for these technologies.”

Cost of living: Tackling it together

Here are some energy saving ideas from environmental scientist Angela Terry, who set up One Home, a social enterprise that shares green, money-saving tips:

  • Get a water-efficient shower head free of charge from your water company and use showers rather than baths
  • Consider loft insulation, which she says costs around £460 for a typical semi-detached home and could save £355 a year on gas bills
  • Hang out washing instead of using a tumble dryer, and walk instead of drive when possible
  • Use windy days to feel where draughts are in the house. Wetting the back of your hand helps to locate them, then use insulation or draught-proofing tape
  • Where available, press the smaller button to use less water to flush the toilet
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