The Energy Crisis: Insight Into The Future

August 18, 2023 by Admin

It’s fair to say that the recent energy crisis hasn’t remained static. Prices have fluctuated, news stories have risen and faded like ominous sunsets, and ideas have been coined and either fallen by the wayside, or become part of what we accept as the changing landscape of energy.

That’s all to say that things have changed drastically in the last 12 months, and while many of us mean to keep up with the latest developments, it can often be difficult to do so. That’s where Tariff, one of the UK’s leading providers of green energy solutions, can help.

We’re firmly committed to helping every business, regardless of sector, achieve a more sustainable future, and that begins with effective education. With our latest article, we’ll break down what’s happening with the energy crisis in 2023, and how that provides us with a glimpse into the future.

We’ll also explore what that might mean for your business going forward, and how you can get involved at the ground floor with the latest developments in energy technology.

 

What Is The Energy Crisis?

An “energy crisis” refers to the rising prices of electricity and gas across both domestic and business energy, alongside a shortage of the natural resources that we use to generate power. This is usually petroleum, natural gas, and coal, but can also include greener energy such as wind and solar power.

Although there have been multiple energy crises in recent memory (most notably the unprecedented highs of crude oil following political instability and tensions in the Middle East in the early 2000s), we’ll only be looking at the most recent energy crisis which began after the COVID pandemic (2021 onwards).

While it’s unlikely you’ll not have been exposed in some capacity to the energy crisis over the last year and a half, it’s important to understand what we mean when we refer to the energy crisis. Many places provide a different definition, and as one of the UK’s frontrunners in green energy, we’ve amalgamated these to give you a comprehensive overview of what the term covers.

As a general rule, an energy “crisis” is used to refer to any time where public demand for energy exceeds – by a significant margin – the power that’s readily available. This is a key connector between both the most recent energy crisis (and the one many immediately think of when hearing the term) and all previous issues we’ve faced in that regard.

It’s equally true that there needs to be an additional factor (or factors) that provides the catalyst for triggering an energy crisis. This could be something like:

• Political Instability – This could be wars, civil unrest and protesting, or terror attacks that have destabilised a previously secure government.
• Economic Instability – Recessions and fluctuating interest rates all play a role in contributing towards an energy crisis.
• Environmental Instability – This may be down to the continued and wide-reaching effects of climate change, or natural disasters like landslides or hurricanes.
• Other Extenuating Factors – While not immediately apparent, there’s often other aspects that act as an accelerant for an energy crisis. This is most visible in the COVID pandemic, which exacerbated existing issues.

All of this points to one central tenet –  it’s rare that there’s a single cause for an energy crisis. These are always multi-faceted and complex, and unearthing the root cause often proves difficult. With that in mind, let’s look in more depth at what led to our most recent energy crisis.

 

Why Did The Energy Crisis Start In The First Place?

As we’ve touched on, there isn’t a single or defining reason why our recent energy crisis began. Instead, there’s a multitude of circumstances that created the metaphorical “perfect storm” which led to the crisis state we find ourselves in with regards to energy.

Let’s explore a few of the more integral factors now, and how they played a pivotal role in contributing towards the situation we find ourselves in.

 

#1 – Russia’s Invasion Of Ukraine

In February of 2022, Russia crossed the border into Ukraine after massing their forces on the fringes of the country, sparking a full-scale, unsanctioned invasion. As devastating as this conflict was and continues to be, it also had an untold detriment on the energy market.

There’s multiple reasons for this. Russia has long been a world leader in the production of oil and natural gas, two of the main sources for continued energy production and supply worldwide. In fact, recent statistics from Al Jazeera found that Russia provided 11% of the world’s total oil consumption.

With their invasion naturally came strict and necessary sanctions, not least of which was the complete restriction of Russia’s ability to sell their oil and natural gas supplies. This came in addition to further trade embargoes, but the ban on selling and shipping oil was one of the more impactful in terms of the energy crisis.

Not only did this mean that the world lost one of its primary sources for natural resources used in the production of energy, but it also meant that those who received the bulk of their power from Russian oil and gas were displaced, and instead needed to source that elsewhere.

This included major economic players like Finland and Poland, who sourced approximately 85% and 62% respectively of their oil from Russia. Unsurprisingly, this meant that these countries needed to rely on other suppliers to meet their citizens’ demands.

The pressure placed on these oil-producing countries also saw the price of oil skyrocket, reaching levels that mirrored previous energy crises.

 

#2 – Post-Pandemic Recovery

Arguably the factor most people think of when they imagine the reasons behind the most recent energy crisis is the COVID pandemic. That’s for good reason – it had untold, far-reaching impacts across every section of society, and essentially ground the world to a screeching and never-before-seen halt.

Not least of these was the way it impacted our energy consumption, as well as the production and distribution of the natural resources needed for that energy. The pandemic led to a steep drop-off in the energy we consumed, particularly as businesses moved to restricted opening hours, home working, and adjusted operations to match with the needs of a changing globe.

By all accounts, returning to normality following the pandemic was understandably slow, and it’s still a process that’s underway, particularly across sectors that are heavily people-based like medicine and hospitality.

That’s seeped into the way energy is distributed under what’s been dubbed the “new normal” and, with delays to supply chains and the shipping processes all exacerbated in the wake of the pandemic, there was a discrepancy between the supply and demand of energy.

 

#3 – The Drastically Changing Climate

Europe, over the course of 2022, saw the hottest weather ever recorded, with research from The Global Drought Observatory showing that almost two-thirds of the continent experienced extreme heat to the point where it was considered a drought.

Of course, this climatological dissonance had profound consequences, but many often don’t realise how it also contributed towards the already worsening energy crisis that had taken root across the world.

As you might expect, the sweltering heat led to dried up rivers and bodies of water, which meant that the European supplies of hydropower dropped by around 20%, according to figures published by the BBC.

Not only that, but nuclear power plants (although scarcely in use across much of the UK) are cooled using river water, and the heatwaves meant their usage had to be carefully limited to avoid any catastrophes.

Closer to home, the unprecedented heat also meant that more conventional oil and coal power plants couldn’t operate at full capacity, leading to power shortages country-wide. Naturally, there’s more demand for power as people aim to run fans, air conditioners and other cooling appliances, and the supply was quickly outstripped by demand.

You might naturally expect solar panels to work much harder and produce more, but these are sadly subject to the same limitations. Research shows that, above 25°C, the machinations of solar panels, alongside more conventional forms of energy generation, simply do not work as well.

 

#4 – Other Extraneous Circumstances

Of course, while the three factors we’ve just looked at are the main reasons behind the deteriorating state of energy across the world, there are other, smaller reasons that feed into the how the energy crisis began.

These include:

• Supply Restrictions – The world’s largest alliance of petroleum producers, the Organisation of the Petroleum Exporting Countries (OPEC+), recently had their supply line cut down by approximately 2 million barrels per day. This naturally had a substantial effect on those who most closely relied on the conglomerate, such as China and the UAE.
• China-Australia Coal Dispute – Following several months of stringent restrictions and limits, China made the decision to completely cut ties with their main coal supplier in Australia, which further intensified China’s existing issues with coal supply.
• The Closure Of Nord Stream 1 – Europe’s primary gas pipeline, stretching some 750 miles from North West Russia to Germany, was closed indefinitely in September 2022 in response to Russia’s illegal invasion of Ukrainian territory.
• Instability In The Energy Market – 2021 and 2022 saw numerous closures across the market, with larger and smaller providers alike succumbing to the continued pressure of the energy crisis.

All of these factors, when taken into consideration alongside preparations for a cleaner future, illustrate just how deeply the energy crisis issues ran. But there are definitive positives on the horizon, and through the concerted efforts of world governments, we’re starting to see the fruits of those labours.

 

What Has Changed Since The Energy Crisis Began?

Of course, many would still argue that we’re only now starting to see the light at the end of what’s been a very dark tunnel when it comes to the energy crisis. That’s partially true – the Ofgem price cap has only recently fallen again to £2,074 on July 1^st, after spending the previous 3 months at £2,500 thanks to a governmental price cap.

We’re clearly making steps in the right direction, and the latest Government forecast predicts this will fall further still as we enter the latter half of 2023, dipping under the £2,000 mark as we enter 2024.

None of this is guaranteed, of course, but it’s a sign that we’re set to rise from the doldrums of a turbulent period. There’s further positives to be gleaned, too. A greater focus on renewable and clean energy illuminates a safer and more climate-conscious path forward, and there’s funding and schemes that further support that.

We’ve explored this fully in our complete guide to the future of renewable energy, but in essence there’s been an influx of further funding opportunities for businesses and enterprises that are paving the way for a brighter future in energy generation.

Sadly though, this is where the positives seem to dry up. Although the price cap has continued its steady and much-needed decline, we’re still seeing significantly higher prices than anything we saw prior to the beginning of 2022.

There’s also no sign of a ceasefire in the Russo-Ukrainian conflict, one of the major drivers behind the first signs of the energy crisis we’re currently in the throes of. While there are certain rays of hope, it is still a highly volatile situation that shows limited signs of any abatement.

That continued conflict also means that the Nord Stream 1 pipeline, responsible for a colossal 45% of all gas imports across Europe, remains closed, with no plans for reopening announced as yet. The same is true of the Nord Stream 2, which was designed as the successor to the original pipeline but had been shelved due to concerns over Russia’s volatility.

Ultimately, though, the limited positives offer a glimmer of hope for the future, and could represent a way forward.

How Does This Shape The Future Of Energy?

While crisis talks are still ongoing throughout world governments, it’s equally important to speculate on the future, and how we can look with optimism to what might happen. We’ve already hinted towards this with the recent changes to price caps, but it’s just as vital that we look long-term, too.

At COP26 at the end of 2021, the vast majority of the world’s major nations agreed to a hugely ambitious selection of goals, with the chief among them being a global target of net-zero by as soon as 2050.

The global energy crisis that took root in 2022 will doubtless have played a role in further discussions, but this is still a firm target worldwide. Some nations have already taken greater leaps than others – Iceland, for instance, generates 99% of all its power from renewable sources, namely geothermal and hydroelectric power.

The UK is aiming to follow suit, with plans in place to revolutionise the country’s approach to electric vehicles through sustained investments and initiatives, as well as further focus on hydrogen and nuclear power, two potential options for a sustainable and (crucially) clean source of energy.

The talks going forward will doubtless revolve around similar initiatives and schemes, particularly as we creep towards that 2050 deadline. The wheels already appear to be in motion, too, with ideas like Net Zero Week already gaining traction and governmental approval.

Arguably most important, though, is how everyone can play their role and act as a building block in the construction of a more sustainable future. That’s where Tariff can play an exceptional role, gearing you and your business up for the a brighter and more energy-efficient future.

 

How Can My Business Get Involved?

At Tariff, we’re firm believers in providing a complete and comprehensive service that takes businesses from their current energy provider, to one that better matches with the rigours and demands of their sector, and with the modern energy landscape.

Our experts will meticulously analyse the needs of your business, pairing you perfectly with companies that aren’t just future-focused, but that are designed with you in mind. We’ll then present our findings to you, providing you with everything you need to make that final decision before our in-house professionals switch everything over for you.

This is all part of our tailormade approach – we know that, as a business owner, you’ve got a huge range of tasks to complete, and changing your energy provider can often fall to the bottom of your to-do list.

All of this comes as standard with everything, but we find that the majority of our clients opt for our tailored net-zero services. This all-inclusive package examines your business’ current energy usage, identifying areas of possible improvement and actively working alongside you to implement them.

We’ll then provide our bespoke Woodland Credits to offset any remaining emissions, and place you in the prime position to be ready for the UK’s 2050 net-zero target. Plus, with our customised approach, we’re able to offer that same robust service to businesses and enterprises across a huge range of sectors.

Get in touch with our expert team today, and learn more about what Tariff can provide for your business, as well as how we’re ideally positioned to offer exceptional net-zero services.