Energy Crunch Comparison 2021-2022.
The rising cost of gas and electricity is stressing household energy bills, threatening businesses productivity and testing government policy. Yet even as the arrival of winter strains the continent’s energy system like never before, the International Energy Agency warned that next year could be an even sterner test. In 2023, gas shipments from Russia could be even lower, possibly zero, and competition from China for liquefied natural gas is likely to be more intense. That will make it much more difficult to build up the kind of stockpiles that Europe is using to heat its homes right now.
The UK’s consumption of the fuel was expected to get close to a two-year high as cold, still weather idled the country’s wind turbines. Gas-fired power plants were generating about 60% of the country’s electricity, according to data from National Grid.
There’s no magic bullet to eliminate this gas dependency. The answer lies in the same climate-friendly measures the IEA has been encouraging its members to adopt for years – energy efficiency, renewables, heat pumps.
“Together, these measures offer a pathway to avoiding price spikes, factory closures, increased use of coal for power generation and fierce international competition for LNG cargoes – in ways that are consistent with the EU’s climate goals,” according to the report by James Herron.
1)UK Energy Consumption:
In the second quarter of 2022 total production was 27.4 million tonnes of oil equivalent, 21 per cent higherthan in the second quarter of 2021. The main reason for the increase is the impact of significant maintenance on the North Sea in Summer 2021, which severely reduced oil and gas output.
Total primary energy consumption for energy uses fell by 0.3 per cent, with petroleum consumption increasing as lockdown restrictions eased on last year but warmer weather reducing gas consumption. When adjusted to take account of weather differences, primary energy consumption rose by 4.4 per cent.
Total final energy consumption was 0.2 per cent lower compared to the second quarter of 2021. Transport consumption rose by 23 per cent as international travel restrictions were eased; domestic consumption fell by 28 per cent with average temperatures warmer than a year earlier, other final users (mainly from the service sector) consumption fell by 3.0 per cent and industrial consumption fell by 0.2 per cent. On a seasonally and temperature adjusted basis, final energy consumption rose by 4.9 per cent, with rises in all sectors except domestic which fell by 7.5 per cent. With the exception of transport consumption which remains relatively low, the energy requirements of most sectors are broadly in line with pre-pandemic levels.
Table 1: Percentage change from Quarter 2 2021, primary energy basis
· UK energy production increased on last year’s record low which saw oil and gas production affected by maintenance. Natural gas production increased by more than 50 per cent and oil production increased by 10 per cent. Low carbon energy also increased.
· Total final energy consumption was 0.2 per cent lower than in the second quarter of 2021, as warmer temperatures decreased demand and offset increased activity in the economy. Transport consumption rose by 23 per cent with petrol and diesel consumption returning to near pre- pandemic levels. Domestic consumption fell by 28 per cent due to warmer weather and a decrease in the amount of time working at home.
· Exports of gas reached a new quarterly high as imports of Liquified Natural Gas (LNG) arriving in the UK helped supply Belgium and the Netherlands. Electricity exports also reached a new record high with the UK becoming a net exporter of electricity for the first time since 2010.
· Energy received from Russia decreased on the same quarter of last year. With no LNG cargoes arriving from Russia, Russia’s share of the UK’s gas imports fell from 7.6 per cent last year to 0. Russia’s share of the UK’s oil imports fell from 15.1 per cent to 3.7 per cent in the second quarter of 2022.
· Renewable generation rose 12 per cent on the same period last year due to more favourable conditions and increased capacity. Renewable’s share of generation rose to 38.6 %, with low carbon’s share increasing 2.1 percentage points to 55.0 % with stronger output from nuclear. Fossil fuel’s share of generation fell by 2.1 percentage points to 41.9 per cent.
· Renewable generation capacity grew by 6.5 per cent on the same quarter last year, with offshore wind growing 23 per cent. The growth in renewable capacity has increased in recent quarters after a relatively sustained period of more modest growth. On a longer timeframe, renewable generation capacity is now six times greater than the same quarter of 2010.
2) Coal and Derived Gases.
In the second quarter of 2022, demand for coal by electricity generators fell to 195 thousand tonnes. Much of this decrease was due to coal supply for Major Power Producers (MPP) falling to a new record low of 17 thousand tonnes in May 2022, with National Grid reporting 635 consecutive coal free hours. Drax coal units were mothballed at the end of March 2021 but will be available for generation if needed over the coming winter. Coal use for electricity generation is expected to cease completely by October 2024. (Chart 2.1)
Overall coal production for the second quarter of 2022 fell to 190 thousand tonnes, down 48 per cent on the second quarter of 2021. Surface mining production fell to 179 thousand tonnes. Mine closures and a pattern of generally falling demand contributed to lower production.
In the second quarter of 2022, coal imports rose to 1.4 million tonnes, 44 per cent up on the same period last year. The USA was the largest supplier of coal into the UK at 54 per cent of total imports. Russia provided 19 per cent of coal imports, down from 48 per cent in the same period last year mirroring the decreasing reliance on Russian energy seen in oil and gas.
3) Oil and Oil Products:
In Quarter 2 2022, production of primary oils rose by 9.3 per cent, recovering from a low in the previous year. In Quarter 2 2021, production reached the second lowest level recorded due to extensive scheduled maintenance on key North Sea infrastructure. However, despite the recent increase, production remains below pre-pandemic levels.
Net imports of primary oils rose to meet demand amid low production. The two largest import sources were Norway and the USA. The proportion of oil (both primary oils and products) from Russia decreased, dropping from 15.1 per cent in the second quarter of 2021 to 3.7 per cent this year.
Demand for petroleum products increased by 15 per cent, driven by a tripling in jet fuel demand. Along witht that demand for transport fuels rose following the removal of pandemic restrictions in comparison with Quarter 2 2022. However, demand is yet to recover to pre-pandemic levels. Oil stocks fell by 8.1 per cent due to high stockholding during the pandemic and the UK’s recent contribution to the International Energy Agency (IEA) coordinated stock release. At the end of Quarter 2 2022, the UK held over 200 days of net imports as stocks, well above the IEA requirement of 90 days.
In Quarter 2 2022, exports reached a record high as the UK supported European efforts to move away from Russian gas. Reduced domestic demand meant that the UK acted as a land-bridge for increased global exports to European markets, utilising interconnectors between the UK, Belgium and the Netherlands.
Liquefied Natural Gas (LNG) imports increased by 37 per cent as the UK’s substantial regasification infrastructure was used to increase supply to European markets. This included a sharp rise in imports from the USA, which more than doubled compared to Quarter 2 2021.
Production increased by 55 per cent, compared to a historic low in the same period the previous year. In 2021, production was muted due to extensive scheduled maintenance on key North Sea infrastructure.
Demand for natural gas fell by 9.7 per cent in comparison with Quarter 2 2021. This was driven by a large fall in domestic consumption, down by a third, following warmer average temperatures. Conversely, gas used for electricity generation increased by 2.0 per cent due to a rise in electricity demand.
Quarter 2 of 2022 saw total electricity generation increase by 8.2 % compared to the same period in 2021, in contrast to a 5.5 per cent decrease in total demand. This came as a result of the UK becoming a net exporter of electricity in Quarter 2, with net exports of 4.0 TWh.
Domestic consumption decreased substantially in Quarter 2 2022, down 15.8 per cent, while both non- domestic sectors saw slightly increased consumption levels. This reflects warmer average temperatures in April and May reducing heating demand, partially offsetting increased demand from the lifting of Covid-19 restrictions.
Renewable electricity generation was 30.5 TWh in Quarter 2 2022, 12 per cent higher than the same period in 2021. Despite this, renewable generation was slightly below the generation from fossil fuels. The increase in renewables was primarily led by increased wind generation, which rose by 42 per cent to 16.3 TWh. This increase in wind generation came due to higher average wind speeds compared to a year ago as well as increased wind capacity.
Fossil fuels generated 33.2 TWh in Quarter 2 2022, higher than the generation from renewable sources. This was a 3.1 per cent increase and came as fossil fuels were needed to meet the total demand for electricity, including the demand for exports. Gas remained the fuel with the highest generation at 32.3 TWh, 4.0 per cent higher than in Quarter 2 2021. Coal generation remained low at 0.5 TWh, 37 per cent lower than the same period in the previous year.
Low carbon sources generated 55.0 per cent of the total in Quarter 2 2022, 2.1 percentage points higher than the previous year. This included a 14 per cent increase in nuclear generation, despite lower operational nuclear capacity following the closure of Hunterston B in January 2022.
In Quarter 2 2022, renewable electricity generation was 30.5 TWh, 12 per cent up on the same quarter last year, and a record for Quarter 2. A strong increase in wind generation (up by 42 per cent) more than offset lower generation from bioenergy (
Renewable capacity is 3.2 GW (6.5 per cent) higher than 2021 Q2, 0.5 GW of which was added during the current quarter. The bulk of the new capacity is in offshore wind (2.4 GW), though onshore wind saw 0.4 GW installed and 0.3 GW in solar PV.
Renewables share of electricity generation was 38.6 per cent in Quarter 2 2022, higher than the same quarter last year (37.3 per cent) but lower than fossil fuels’ share (41.9 per cent).
Figure 1: Added capacity since 2019 for the leading technologies (Energy Trends table 6.1)
Around three quarters of the new capacity is in offshore wind; East Moray added 0.9 GW in Quarter 1 2022 and Hornsey Two added 0.9 during the first two quarters of 2022. Onshore wind saw an additional 0.4 GW of capacity and solar PV 0.3 GW.
Figure 2: Renewables’ share of electricity generation – Q2 2021 and Q2 2022 (Energy Trends table 6.1)
In Quarter 2 2022, renewables’ share of generation was 38.6 per cent, 1.3 percentage points higher than Quarter 2 2021 but lower than the generation share of fossil fuels (41.9 per cent). This is largely due to an increase in wind generation, with onshore’s share increasing from 7.3 per cent to 9.4 per cent, and offshore from 8.5 per cent to 11.3 per cent. This increase more than offset the fall in bioenergy’s share with reduced generation at a major plant due to planned maintenance.
Energy demand effecting homes:
Fuel poverty kills thousands of people in the UK each winter. It means being unable to afford to heat a home to a safe and comfortable level, typically when 10% or more of household net income is spent on fuel. It damages our health, wellbeing and educational attainment and makes it hard for people to participate in society and the economy.
For decades, around 10% of UK households, or millions of homes, have been affected by fuel poverty. This year, the cost of living crisis, including a spike in gas prices as a result of Russia’s invasion of Ukraine, has prompted a surge in the number of households struggling to afford heat and electricity.
In October 2021, an estimated 4 million households in the UK were in fuel poverty. But the largest increase in gas and electricity prices ever in April 2022 has pushed a further 2.7 million UK households into fuel poverty, bringing the total number to 6.7 million.
And this was before the government regulator Ofgem announced in August that average energy bills were likely to hit £3,549 by October 2022. Under this scenario, it was estimated that 8.2 million households, or one in three homes, would be in fuel poverty this winter, plunging an additional 1.5 million households into fuel poverty in the space of just six months.
In a bid to stem this crisis, the government recently announced a two-year plan to cap the cost of household energy so the average bill is £2,500 a year. Although much lower than Ofgem’s £3,549-a-year projection, £2,500 still represents a doubling of average energy bills in the space of a year and a £500 increase since April 2022.
The cap is therefore unlikely to significantly reduce the number of households falling into fuel poverty this winter. Those with high energy needs can still expect to pay more than the £2,500 average.
Following an increase in the employment rate since early 2012, the rate decreased from the start of the coronavirus (COVID-19) pandemic. There has been an increase since the end of 2020; however, the employment rate was largely unchanged during the latest three-month period.
The number of full-time employees decreased during the latest three-month period but is still above pre-pandemic levels. Part-time employees had generally been increasing since the beginning of 2021, showing recovery from the large falls in the early stages of the pandemic; there was, however, a decrease during the latest three-month period. The number of self-employed workers fell in the first year of the coronavirus pandemic and has remained low, although the number has increased during the latest three-month period for both the full-time and part-time self-employed (Figure 3).
Meanwhile, the number of people with second jobs increased slightly during the latest three-month period, up 29,000 to 1.252 million. Below figures shows UK employees and self-employed workers, full-time and part-time workers aged 16 years and over, seasonally adjusted, cumulative change from July to September 2019, for each period up to July to September 2022
Figure 3: The number of employees decreased over the latest three-month (Office for National Statistics - Labour Force Survey)
The unemployment rate had generally been falling since late 2013 until the start of the coronavirus (COVID-19) pandemic. It increased until the end of 2020 but has now returned to pre-coronavirus pandemic levels. Over the latest three-month period, the unemployment rate decreased. However, single-month unemployment estimates, available in Dataset X01, show an increase in the unemployment rate in September 2022. In the latest three-month period, the number of people unemployed for all duration categories decreased (Figure 4)
Figure 4: The number of people unemployed for all duration categories decreased in the latest three-month period (Office for National Statistics - Labour Force Survey)
In July to September 2022, reports of redundancies in the three months prior to interview increased by 0.7 per thousand employees, compared with the previous three-month period, to 2.7 per thousand employees. Figure 5 shows UK redundancy rate, people aged 16 years and over, seasonally adjusted, between July to September 2007 and July to September 2022
Figure 5: The redundancy rate has increased slightly in the latest three-month period but remains low (Office for National Statistics - Labour Force Survey)
UK ability to scrape by this year’s historic energy crunch has been supported in no small part by factors beyond its direct control.For months, UK have been planning for the moment when they’ll need to put in place emergency steps to cope with energy shortages. That time may have finally arrived.
A bitter freeze has descended upon the northern half of the region, and it’s set to deepen. The UK’s Met Office has issued a warning for snow and ice in parts of the country including London over the weekend.
To make matters worse, wind generation in Britain - the world’s second-biggest market for the offshore power source - is expected to slump. When a similar situation occurred late last month, the UK network operator stopped just short of calling on some households to cut energy use to cover the gap. Everyone from consumers to power traders is now on watch to see what the coming days may bring.