Daily Telegraph Gas Crunch19 Sep 2021 14:27
British manufacturing leaders fear an industrial collapse over the winter as spiralling gas and electricity prices overwhelm the country’s energy defences.
Wafer-thin gas reserves have left the British economy almost uniquely vulnerable to an extreme global supply squeeze, and dangerously reliant on cross-Channel interconnectors that may be curtailed if Europe itself faces power blackouts and serious industrial stoppages.
Andrew Large, the outgoing chairman of the Energy Intensive Users Group, said: “It is potentially catastrophic. We’re already seeing plant closures at a time of year when the weather is still warm and domestic heating is low. Fast forward two months and this could be an acute crisis.
“CF Fertilizers have already stopped output and they account for 40pc to 60pc of the UK supply, which could have disastrous effects on the supply chain. The steel, cement, ceramics, glass, industrial chemicals, and the paper sector are all at risk. Individual companies are facing the very serious question of whether they can continue to operate.”
Gas futures contracts on the ICE exchange have risen fourfold over the last year to 165 pence per therm, while intraday electricity prices have become unhinged. Last week the National Grid was having to pay £4,000 per megawatt hour to secure back-up electricity at short notice.
Gas price surge
Line chart with 254 data points.
UK gas futures have risen to a record high
View as data table, Gas price surge
The chart has 1 X axis displaying Time. Range: 2020-09-11 08:24:00 to 2021-09-18 15:36:00.
The chart has 1 Y axis displaying
Pence per therm
. Range: 0 to 200.
Jan '21
May '21
Sep '21
0
50
100
150
200
SOURCE: Bloomberg
Gas price surge
UK gas futures have risen to a record high
Pence per therm
End of interactive chart.
The cost squeeze threatens to abort the economic recovery just as the furlough scheme winds down and fiscal stimulus fades. In a worst case scenario it could lead to systemic havoc akin to the industrial paralysis and candle-lit evenings endured in the 1970s, something that no government or prime minister can survive.
“There is a wider gas supply crunch across Europe and the question of storage retention is becoming geostrategic,” Mr Large said. "In an extreme situation countries are going to be looking at the letter of the law to see if they can take unilateral action. The UK may have to take what comes.”
The UK has slashed its strategic gas storage to barely 1.7pc of annual demand by closing the Rough facility off the Yorkshire coast, subcontracting the costly task of storage to Germany and the Netherlands. Clive Moffatt, a gas consultant and former adviser to the Government on energy security, said: “It should be nearer 25pc
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