It’s said that in days of old, worshipers of the weather god Thor used to sacrifice men at the Temple of Uppsala and hang their bodies in nearby trees to win his favor. It’s a strategy Liz Truss may be forced to consider this winter as, thanks to more than a decade of failed energy policy, Britain’s well-being will largely depend upon the weather. If it gets too cold, we face blackouts. Fortunately for the Prime Minister, though she may lack a steady stream of natural gas to keep us warm, she can count on a ready supply of verbose ex-Cabinet ministers to disembowel.
This, I’m afraid, is where we are. The National Grid has warned that households may be cut off for certain periods of the day if the weather turns. Aside from relying on Thor, our fate will be governed by the vagaries of global liquefied natural gas (LNG) prices, gas rationing on the Continent and domestic demand.
Having capped the price of gas, the Government has since been in denial about the need to ration demand, with the latest reports suggesting that Ms Truss herself has squashed moves for a campaign to reduce household consumption. This is what’s known as tempting the gods.
Let me say it plainly. There will be rationing. The only question is how bad it will be. If certain heavy industry is forced to shut down (as it already has across much of the Continent), most regular punters won’t notice, despite the economic damage it wreaks. But if households are told to switch off their Netflix streams and forced to spend candle-lit evenings talking or reading, by God they will notice that. If, even worse, power supplies dip unexpectedly, causing lethal factory or hospital equipment to turn off and on, the public outcry will make Ms Truss’s current polling numbers look positively Blairite.
In spite of the risks, the Government is blithely focused on other matters. This week, the Business Secretary Jacob Rees-Mogg spent an hour at the Tories’ conference in Birmingham talking about the Government’s growth plans without mentioning winter energy supplies once. For some weeks, I have been asking senior Tory figures what they think about the probability of blackouts. “I’ve been assured that won’t happen,” was one typical answer. I was not reassured.
The truth, as the National Grid’s forecasts show, is that supply margins for both gas and electricity are wafer-thin and that’s assuming we can continue to import both from the Continent. As it happens, France is making the same assumption in the opposite direction. Its plan to keep the lights on in January assumes it can import power from us. Of course, that could work when it’s windy here and still over there. Or, you know, it could not. Best to hang another man on the tree for Thor and see what happens.
One of the biggest sources of winter gas in Europe is Germany because of its prodigious storage capacity (we shut down most of our storage in 2017 to save cash – hey ho). Unfortunately, as you might have heard, Germany itself is rather short of gas. A Deutsche Bank model for German gas stocks has the country running out by this Christmas unless it slashes both exports and domestic demand. Meanwhile, Opec and Russia felt the oil price rocketing this week after churlishly refusing to increase production, despite supply crunches and recession across the world.
With energy costs so high, there is even talk of a totally mad EU plan to cap LNG prices, forcing sellers to accept an artificially suppressed rate for their gas. How exactly that would play out for the UK is unclear. On one hand, it would make the uncapped wholesale price offered in British markets relatively attractive to European gas suppliers and global LNG tankers wondering where to dock. The gas would start flowing Britain-ward. On the other hand, it may well put off additional tankers from coming up to Europe in vast numbers because they might rather chug off to serve uncapped prices in Asian markets instead.
The EU has at least brokered an agreement between its members to try and get gas demand down by 15 per cent this winter. This is the obvious and necessary corollary to a policy of capping consumer prices, adopted across the Continent. Businesses and public buildings are consequently dimming their lights, mothballing intensive industry and lowering thermostats. By contrast, the National Grid’s forecasts assumes just a 6 per cent reduction in British demand. That is without even taking into account the Government’s decision to subsidize energy consumption for all via the price freeze.
For the past week, Ms Truss and her colleagues have fallen back to talking about the price freeze whenever questioned about the mini-Budget. As avowed free market groupies, they might want to spend a little more time thinking through the consequences of the policy and working out how to explain the lack of action taken to insulate more homes and reduce demand before things get really ugly. Given market ructions and the fact that the Treasury is now on the hook for energy prices across the whole economy, you would think that at a minimum that this ought to be a fiscal priority.
But instead of sounding the alarm, Tory backbenchers like Maria Caulfield are defending the lack of action, writing online yesterday: “I’m all for an energy saving campaign this winter but do we need to spend £15 million to do that?. The PM is right to question if this is the best use of taxpayers’ money.” No, she isn’t.
In the background, the Government does at least appear to be chasing new long-term gas supplies. It’s said to be negotiating 20-year contracts with Norway and Qatar and has launched a fresh licensing round for the North Sea. And perhaps the penny is dropping: energy minister Graham Stuart admitted that it was “impossible” to predict if there would be blackouts this winter but did add, comfortingly: “We are not planning to have that.”
Still, this marks progress from Ms Truss’s position on energy rationing during the leadership campaign: “I do rule that out,” she declared. Unfortunately, the laws of physics didn’t listen.
But the true prize for delusion this week goes to Greg Hands, the former energy minister. “The best way to prevent blackouts,” he wrote, “is to vote Conservative.”
At least King Canute knew he couldn’t turn back the tides. This lot are deep in looney land, howling at the Moon.