Weekly News Review - 24th October 2022
Energy bill help to be reduced from April, says new chancellor
A scheme to cap all household energy bills for two years will be cut from April, the new chancellor has said. The government’s Energy Price Guarantee was put in place to limit the price that suppliers could charge for each unit of energy. Now that will only be in place for six months, just to cover this winter.
The Treasury will review support given from April, but Jeremy Hunt said there would be “a new approach” targeting those in the most need. Mr Hunt is trying to save money after the government’s mini-budget left a big projected hole in the public finances. Its plan for large tax cuts sparked turmoil on financial markets over how the plans would be funded.
“Beyond April, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices,” the chancellor said. “The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.”
Before this guarantee was introduced, the energy price cap – the highest amount suppliers are allowed to charge households for every unit of energy they use – had been due to rise to £3,549 for a typical household from October. Under the Energy Price Guarantee, announced last month, the Government vowed to limit this figure to £2,500 although higher energy use will result in bills above this figure.
Predictions from consultants Cornwall Insight suggest that, for households that do not receive any support, a typical annual energy bill could be £4,348 in the spring, dropping to £3,722 next winter – however that prediction could be significantly affected by changing wholesale prices.
The consultancy’s chief executive, Gareth Miller, called for the government to use the period in which the EPG is in place to look at more targeted measures and replace the Ofgem price cap, originally devised by the former prime minister Theresa May.
“A world in which we move back to the default tariff cap cannot credibly be one that is among those options, given the heightened cost environment likely to prevail in the medium term and the situation that arose before the EPG was implemented,” Miller said.
Germany extends life of nuclear power plants until next April
German Chancellor Olaf Scholz has instructed the country’s three remaining nuclear power stations to keep operating until next April, as the energy crisis sparked by Russia’s invasion of Ukraine threatens electricity supplies. Germany had originally planned to phase out all three by the end of this year.
The decision to phase out nuclear power was taken in 2011 after Japan’s Fukushima nuclear disaster. But gas prices have soared since Russia’s invasion of Ukraine in February, which disrupted Russia’s huge oil and gas exports to the EU. In August Russia turned off the gas flowing to Germany via the Nord Stream 1 undersea pipeline.
In 2021 Germany imported 55% of its gas from Russia, but this dropped to 35% in the summer and has since declined further. Germany is now scrambling to maintain sufficient reserves for the winter which has led to it restarting mothballed coal-fired power stations, though the plan is to phase out coal in the drive for green energy.
Mr Scholz’s order overruled the Greens in his coalition, who wanted two plants kept on standby, to be used if needed. The three nuclear power stations have a combined capacity of 4.1GW, enough to meet around 6% of Germany’s electricity demand. In December 2021, the closure of another three nuclear power stations reduced capacity from 8.1GW, increasing demand for gas-fired generation.
Chancellor Scholz’s third coalition partner, the liberal Free Democrats (FDP), welcomed his move to keep nuclear power as part of the mix. The Social Democrat (SPD) chancellor also called for ministries to present an “ambitious” law to boost energy efficiency and to put into law a phase-out of coal by 2030.
After amending the Atomic Energy Act to extend the lifespan of the plants, the draft bill should go through the cabinet on Wednesday and with the three coalition partners agreeing to it, is expected to pass the upper and lower houses of parliament by the end of November.
Russian strikes prompt power cuts across Ukraine
Ukraine’s energy facilities have again been targeted by Russian forces, leaving parts of Kyiv, Dnipro and Zhytomyr with no power and water. Explosions were heard in the capital shortly after 09:00 (06:00 GMT) on Tuesday and plumes of smoke billowed from around a power station near the Dnipro river. Power and water were cut in Zhytomyr, west of Kyiv, and two facilities were badly damaged in Dnipro.
The latest attacks came 24 hours after Kyiv was hit by “kamikaze” drones. The unmanned drones, believed to be Iranian-made, killed at least five people in the capital and four in the northern city of Sumy, and struck critical infrastructure, with power outages reported in hundreds of towns and villages.
On Tuesday, President Volodymyr Zelensky said, “30% of Ukraine’s power stations have been destroyed, causing massive blackouts across the country”. Further strikes have since followed on Wednesday prompting Ukraine’s national energy company to advise citizens to “charge everything” by 07:00 (04:00 GMT) Thursday because of expected power cuts.
Russia has stepped up attacks in recent weeks on electricity infrastructure in cities away from the front lines. Officials have rushed to repair the damage, but the strikes, ahead of winter, have raised concerns about how the system will respond.
In some cities, Ukrainians are buying power generators and gas burners, while across the country, people have been urged to reduce their energy consumption at peak times. Some towns are already facing rolling blackouts.
Ukrainian MP Lesia Vasylenko said: “We were expecting that Russia will intensify attacks on energy infrastructure and civilian infrastructure and increase the urban warfare towards autumn and here we are exactly with that scenario taking place.”
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