Why is the United Kingdom considering a bailout for energy companies?
The UK is considering whether its energy sector needs a government bailout, as high prices, strong demand, and the lingering impacts of a harsh winter season are putting pressure on energy companies.
Business Secretary Kwasi Kwarteng said on Tuesday that the government is studying “a lot of ideas” on how to help the country’s troubled energy sector. According to the Guardian, five small suppliers have already gone bankrupt in recent weeks, with four more projected to do so before the end of the month. However, by the winter, when the current high demand will compound high prices, this number could grow.
In recent days, Kwarteng spoke with energy executives, emphasizing that poorly operated businesses should not be bailed out at the expense of taxpayers. According to Kwarteng, the state’s priority should be to assure the continuation of electricity supply to customers rather than to save every struggling company from bankruptcy.
“We’re looking into consumer protection solutions, and meetings are taking place across the government today and this week. “We will assure continuity of supply for UK consumers in any scenario – through a supplier of last resort or a special administrator if necessary,” Kwarteng added, emphasizing that “consumers come first.”
According to the energy industry trade group Oil & Gas U.K., energy costs in the United Kingdom have risen by 250 percent since January due to increased demand.
The increase in pricing is due to a number of variables, the most important of which is a supply and demand imbalance. The majority of Britain’s energy needs are satisfied by local sources, with 48 percent of all gas coming from the country’s own natural gas resources. However, the continental shelf of the United Kingdom, from which the gas is extracted, is deemed “matured,” which means that the quantity of energy it can provide is being stretched.
Low wind speeds have similarly hampered renewable energy supplies. Onshore and offshore wind energy facilities account for 24% of total supplies in the United Kingdom.
The United Kingdom’s energy issues reflect a European-wide trend of increased pricing due to decreased supplies. According to CNBC, the gas price at the Dutch TTF hub, which serves as a European benchmark for gas trading, was just above 74 euros ($86.9) per megawatt-hour by early afternoon in London. Last week’s record high of 79 euros per megawatt-hour was narrowly missed.
However, increased demand from China and other Asian countries. Brief News from Washington Newsday.