With the war in Ukraine causing unprecedented energy price surges due to gas shortages, governments across the world are looking at the best ways to make up for the shortfall in gas supplies, make their countries energy independent, and sure up energy supplies to prevent blackouts this winter.

The UK is no exception, with Britons facing rapidly rising bills, which are expected to be up by 80% in October, urgent action is needed to ensure that people are able to keep the lights on this winter. The question you may be asking is “What is new prime minister Liz Truss’ plan, and can it really fix the energy crisis?” – we’ve broken it down below.

What is Liz Truss’ plan?

At its heart, Liz Truss’ energy plan aims to limit the average annual household bill to £2,500, this price guarantee will last two years. In real terms, this means that you will still pay for the gas and electricity you use, but the government’s Energy Price Guarantee will limit the price that suppliers can charge for each unit of energy.

This means that for a household with typical usage – one that uses 12,000 kWh (kilowatt hours) of gas per year and 2,900 kWh of electricity per year – the annual bill will not rise above £2,500 from October, without this intervention this bill would have been £3,549 per year. This same household would have paid £1,277 per year last winter.

In precise terms this will mean that on average, the unit price dual fuel customers paying by direct debit will be paying would be limited to 34.0p per kilowatt hour (kWh) for electricity and 10.3p per kWh for gas.

Businesses will be offered the same guarantee for the next six months, and public services such as schools and hospitals will also benefit.

Although Liz Truss refused to specify the total cost of the program, which will be set out by new chancellor Jeremy Hunt in a fiscal statement in the coming weeks, it is thought to be in the region of £150 billion.

As well as implementing the energy price cap, Liz Truss is proposing a ramping up of commercial projects by oil corporations, including an expansion of North Sea oil and gas, a resumption of fracking on the UK mainland, and building new nuclear power plants.

How will the plan be paid for?

There continues to be a lot of uncertainty around how this energy plan will be paid for, with Labour having called for the government to fund the intervention through a one-off tax on energy producer profits, also known as a windfall tax.

The government initially rejected the proposal signalling instead that the treasury would ramp up public borrowing on international markets which would later be paid for through taxes, however, a partial u-turn was announced on Tuesday the 11th of October.

The government announced it was stepping in with a temporary “cost-plus revenue limit” for renewable and nuclear electricity companies in England and Wales. This will limit the amount companies can make, “allowing generators to cover their costs, plus receive an appropriate revenue”, and will come into force at the start of next year.

It is estimated that taxing companies such as wind and solar generators will raise between £3bn and £4bn to help offset the cost of the Energy Price Guarantee.

Can Liz Truss’ plan really fix the UK energy crisis?

Whilst support for soaring energy bills is much needed, many have concerns about the effectiveness of Liz Truss’ energy plan.

Many critics believe that Liz Truss’ energy plan does not address the need for energy efficiency. These critics include the Labour party who claim that an awareness campaign could save households up to £8.4bn, with this figure being based on an average saving of £300 per household.

The government initially ignored its own climate advisors by pulling the plan for an energy-saving campaign to raise public awareness of what can be done to reduce energy use, with Liz Truss reporting to have been “ideologically opposed” to the campaign, fearing it would be too interventionist. The government later u-turned on their decision to pull the energy-saving campaign, with the prime minister telling MPs that Energy Secretary Jacob Rees-Mogg is “working on a plan to help companies and individuals use energy more efficiently”.

Across Europe, measures are being taken to encourage people to reduce energy consumption. In France, Spain and Germany, public buildings are to be heated to a maximum of 19C, while illuminated advertising in Germany and lights in shop windows in Spain have been banned after 10pm. In Paris, the Eiffel Tower’s lights now go off at 11.45pm instead of 1am.

There are also concerns over the government’s longer term energy plans, and the effects it may have on the 2050 net zero target.

Part of Liz Truss’ plan to tackle the energy crisis has been reversing the ban on fracking, meaning production could begin in as little as six months. The ban had been introduced in 2019 following concerns over a series of earth tremors in Lancashire by green groups and locals.

The lifting of the ban has proven to be a particularly unpopular policy, sparking anger from members of all parties including many prominent conservative MPs.

Labour said the Truss government had created a “charter for earthquakes” while the Liberal Democrats said voters in rural areas were being treated as “guinea pigs” for the fracking industry.

The policy has also caused a lot of concern from campaign groups. Katie White, from conservation group WWF, said: “Today’s fracking announcement is a clear breach of a manifesto promise and has no scientific, economic or environmental legs to stand on. Energy security will not be strengthened by fracking or digging up more dirty oil and gas from the North Sea. Our reliance on destructive fossil fuels is the reason we’re grappling with the worst cost-of-living crisis in a generation.

“Our leaders must prioritise cutting costs and future-proofing our energy system by investing in energy efficiency and homegrown renewables, while also protecting our desperately vulnerable natural world. Breaking climate promises will be this government’s biggest betrayal to future generations – and won’t be forgotten or forgiven.”

The policy has also shown to be very unpopular with the public, one Autumn 2021 government analysis found that “opposition to fracking clearly outweighed support”, with 17% of members of the public saying they supported shale gas extraction compared with 45% saying that they opposed it, including 22% of people who strongly opposed it. Bans remain in place in Scotland and Wales.

Aside from the lifting of the ban, further discontent was sparked among members of parliament including conservative MPs this week when Ranil Jayawardena, Secretary of State for Environment, Food and Rural Affairs, instructed civil servants to begin reclassifying land targeted for building solar farms – 58 per cent of agricultural land – as unbuildable.

Liz Truss has said she believes solar panels should not be placed on land that could be used for livestock or crops to boost food production and security.

However, the director of a Tory environment group Conservative Environment Network – compromising 150 Tories – has told Sky News the prime minister’s plan to ban solar panels from farmland is “disproportionate” and risks being “damaging to investor confidence in an energy crisis”, adding that “Solar on less productive agricultural land supports food security by diversifying farmers’ incomes and making farm businesses more resilient.”

The group join the National Trust and the RSPB, among others, who are concerned about some of the new government’s policies on planning and deregulation and how they might affect the battle against climate change.

Though measures such as the Energy Price Guarantee will start to bring some relief to consumers, it is clear that there is still a lot of doubt over how Liz Truss will solve the energy crisis in the longer term, and many questions yet to answer over the effectiveness and cost, both monetarily and environmentally, of the methods that she is proposing.

How long will the energy crisis last and what can you do to protect yourself against rising energy bills?

It is expected that the energy crisis will last until at least 2024.

The Centre for Economics and Business Research’s deputy chairman Douglas McWilliams has said that “unless the Ukraine situation resolves itself, prices are likely to be high but falling for three or four years.”

Whilst there are many steps you can take to reduce your energy usage and save on your energy bills, the best way to guard yourself against rising energy bills is to move towards energy autonomy on a homeowner level. For more information on why now is the best time to make the move, you can check out our post here.

There has never been a better time to make your home energy autonomous, with the price of solar having dropped by more than 80 percent in the last ten years and a faster solar payback time than ever before. If you would like to see if investing in solar energy could benefit you, why not book a free consultation with us to discuss your energy with our experts!

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