Politicians should take note: an energy crisis is quietly building | Nils Pratley

Overreliance on gas as ‘transition’ source of energy and system’s lack of resilience is being exposed

Price spikes in the global energy market are meant to happen during the cold months of a northern hemisphere winter, which is why their arrival now is alarming. It suggests the current mini-crisis – which, embarrassingly, is seeing the UK shovel millions in the direction of coal plant producers just ahead of the Cop26 climate conference in Glasgow – has the potential to become much worse come January or February.

As ever in the energy market, it takes a combination of factors to produce a price surge of the degree seen on Monday in the UK – record levels for short-term electricity prices. Wind speeds have been low across northern Europe for most of the year. The UK’s gas stocks are low. And a few plants have gone offline for repairs at a bad moment.

In international markets, economic recovery in China and parts of Asia has accelerated demand for LNG (liquified natural gas). US shale gas producers, now under political pressure to curb fracking, are not producing the same volumes as of old. Russia, some argue, is underproducing gas ahead of the opening of the Nord Stream 2 pipeline to Germany. The UK is certainly not alone in experiencing the storm in the fossil gas market.

A few factors – wind speeds, for example – could reverse to relieve the immediate pressure. But one can also diagnose a basic overreliance in the UK on gas as the “transition” source of fossil fuel energy on the way to net zero. There’s not much resilience in the system, with so many nuclear plants due to come offline this decade. The Bank of England may even been obliged to take notice: we’re now at the point where the year-on-year hikes in consumers’ energy bills have a meaningful impact on overall inflation numbers.

In the end, high prices encourage more supply and dampen demand. The definition of a proper crisis, perhaps, is a situation where there is not enough gas to satisfy demand, which could mean rationing for businesses for short periods. That prospect is still unlikely this winter, thinks independent energy analyst Peter Atherton, but is “a greater possibility than it has been at any time since the 1990s”.

A lot can happen between now and the properly cold months, but politicians should take note: an energy crisis is quietly building.

Primark needs no dressing down for one wobbly quarter

Has Primark finally come a cropper on account of its old-school refusal to a sell a single T-shirt or pair of flip-flops online? Has lockdown changed shopping habits permanently at the cheap end of the fashion game?

Well, that’s one possible reading of a dramatic downturn in Primark’s sales between mid-June and mid-September. In the early weeks, the UK stores were down by 24% versus the equivalent pre-pandemic period in 2019. Even in the final four weeks, sales were running 8% lower.

But the thesis that Primark has been upended also feels wrong – or, at least, extremely premature. The explanation offered by AB Foods, its owner, was coherent: this is no more than the “pingdemic” factor at work. High streets became less busy just at the moment when fewer foreign holidays were depressing demand for seasonal kit. Management pointed to industry data to support its reading – Primark’s overall share of the market was exactly the same as two years ago.

One of these years Primark may have to rethink its lack of online transaction capability, but at the moment, you can understand why the chain isn’t wavering from its analysis that distribution and handling costs would undermine a model that, for better or worse, relies on the clothes being extremely cheap.

It’s only six months since customers at Primark’s flagship stores queued round the block for their reopening. One wobbly quarter probably doesn’t mean the world has changed.

An airline marriage to O’Leary’s taste

“Both easyJet and Wizz will either need to be taken out or   … coalesce together,” says Ryanair’s Michael O’Leary, talking to the FT.

He’s not the only person predicting consolidation in the European short-haul aviation market. Indeed, even easyJet, when it unveiled its £1.2bn rights issue last week, muttered that it wasn’t opposed to the principle.

But one must also note that an easyJet/Wizz combo sounds like excellent news for Ryanair. O’Leary would surely enjoy seeing two competitors with different price propositions, and very different cultures, tie themselves in knots while trying to remove capacity. He’d been cheering them to the altar.

Contributor

Nils Pratley

The GuardianTramp

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