Cost-of-living crisis: Why the UK is 'not necessarily the miser of Europe’ on energy
At 8pm on Thursday evening, Italy’s historic buildings and landmarks suddenly plunged into darkness.
Simultaneously scheduled across more than 8,000 towns and cities across the country, the blackout saw monuments including the Palazzo Vecchio in Florence and the capital’s Capitoline Hill turn out their lights in protest at rocketing utility bills in the country.
“The increase in bills is a burden and puts families and institutions in serious difficulty,” Rome mayor Roberto Gualtieri told media, in support of the movement organised by the National Association of Italian Municipalities.
As bills continue their inevitable rise across Europe – hit by a perfect storm of supply restrictions across the continent from Russia, countries such as China buying up more international gas shipments and unusually still winds last summer, meaning more gas was needed to replace the electricity that would otherwise have been produced by wind turbines – there are few countries in the region unaffected by the crisis.
In Italy, the energy regulator warned at the end of last year that electricity bills would leap by 54 per cent and gas by 41.8 per cent, despite billions of euros of public money having already been pumped into the system to mitigate rises for consumers. Without that, the regulator said, the rises would have been 65 per cent and 59.2 per cent respectively.
Similarly, in Scotland and the rest of the UK, householders are bracing themselves for a huge hike in utility bills later this year as Ofgem increased the energy price cap by 54 per cent, to account for spiralling wholesale energy costs across Europe.
The Italian protest comes in the same week thousands of people took to the streets in Turkey to burn their electricity bills in protests at “unbearable” costs. Some restaurants and cafes have begun to add a heating tax to their table charge as they struggle to pay utilities.
"The UK isn’t facing this crisis alone, it’s a global energy crisis with rising prices everywhere,” says Josie Dent, managing economist at the Centre for Economics and Business Research.
European energy prices have already risen by an average of 28.8 per cent in the year to January. However, how that has played out for the coffers of consumers in different nations has depended very much on the funding packages implemented by government.
The French Government, which relies more heavily on nuclear power than the UK, recently announced household bills would not increase by more than 4 per cent. In December, the Norwegian authorities pledged to cover 55 per cent of consumers’ bill on energy prices above a monthly average of 70 øre per kilowatt-hour, increasing the support to 80 per cent last month following pressure from the opposition.
At the other end of the scale, four million German households are set to see their bills rise by 60 per cent after the country announced a relatively paltry cut to a surcharge on bills there used to fund renewable energy development.
Closer to home, finance secretary Kate Forbes this week announced a £150 council tax discount to more than 1.8 million homes in Scotland to ease cost-of-living pressures, echoing measures introduced by the UK Government last week. Due to energy policy being a devolved issue, UK Government funding was provided to Scotland through the Barnett formula.
"It’s not that the UK is necessarily the miser of Europe,” says Ms Dent. “There are more generous countries – yes, there are few that are as generous as what has been done in France – but then you look at places like Germany and we look comparatively better off than many German households.
"However, lots of other countries have also taken measures like VAT cuts on energy bills, that I’m sure the government considered here and were recommended, but the government didn't go with, which will have helped consumers, I think, probably to a greater extent than our government policies here.”
For much of mainland Europe, however, the reliance on Russian gas is more of a factor then in the UK. Around 40 per cent of gas in Europe comes from Russia, sparking fears increased tensions in the region over Ukraine could see prices rise even further.
Last week, reports claimed the European Commission was putting in place contingency plans to find alternative suppliers if relations with Russia hit crisis point. Measures could include introducing price caps across the bloc, something that has previously been ruled out by the EU’s agency for energy officials.
Dr Matthew Hannon, reader of sustainable energy policy and business models at Strathclyde Business School, says some European nations’ circumstances allow them to make different decisions to those made in the UK.
"The UK isn't alone in trying to cut bills,” he says. “I think other countries have looked more at directly cutting taxes or levies associated with bills.
"Somewhere like Germany has looked to scrap surcharges on its electricity bills. France has done something quite different, because it's got a nationalised energy supplier with EDF, it's taken quite a different tack in terms of limiting bill hikes to only 4 per cent. The government is essentially forcing EDF to sell electricity from its nuclear plants at a below market rate to other suppliers. So that's something we can't do in the UK. We got rid of our nationalised energy system a long time ago.”
Dr Hannon points out Scotland’s “addiction” to using gas to heat homes, combined with an ageing and inefficient housing stock, has made it more susceptible to high bills than other European nations.
He describes Scandinavian countries’ reliance on other forms of heating such as district heating systems powered by biomass, which even if powered by gas uses far less than individual boilers, which are standard in the UK.
“The UK has an exceptionally high penetration of gas boilers versus its counterparts in Europe, particularly if you look at Finland,” he explains. “Finland has a relatively small gas grid and a much higher penetration of non-gas heating, whether that's heat pumps or biomass, and traditionally, hasn't, therefore, necessarily felt the pain in the same way as Britain, where our reliance on gas to heat our homes is certainly one of the highest around.
"The second part of that is that we're also really hungry for gas in terms of our building stock and in comparison to our European neighbours, we have some of the least efficient housing stuff around, certainly some of the oldest.”
Dr Hannon says retrofitting older properties is the only way to improve insulation and heating efficiency. However, he says that would require government funding to ensure everyone could afford to do so.
In Ireland, a scheme was launched this week offering grants of around €25,000 (£21,000) to people to insulate their homes.
“We don't have that level of policy ambition here in the UK,” says Dr Hannon. "What we're doing is papering over the cracks. This is a sticking plaster, which doesn't solve the problem unless government is willing to implement these policies long term.”
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