The ongoing Energy Crisis has created unprecedented political, economic, and social distress in the UK. Some potential solutions exist to address the immediate issue of significant energy price rises. However, I believe that we must equally focus on implementing effective longer-term solutions to reduce the risk of a future, even more disruptive, energy crises. To do this, the UK needs to shift to a more sustainable, cost-effective, and less volatile mix of energy generation sources to mitigate the impact of climate change. 

‘Energy Crisis’ refers to a severe blockage in delivering energy resources to an economy, particularly those that provide power to electrical and gas grids or are utilised as petrol and diesel. It is a crisis because the energy demand is relatively inelastic. As such, the only way to balance existing demand with sharply reduced supply is via significantly increased prices. This has caused economic hardship and difficulty to both consumers and businesses. Business margins have been squeezed as energy costs rise (i.e., they make less profit). Consumers need to spend more on fuel and heating and so cut back on discretionary spending, which also leads to lower sales and further reduced profit margins for businesses in other industries. 

At its most superficial level, the Energy Crisis’s root cause is a supply and demand imbalance. Due to recent events with the Ukrainian conflict, Europe has been thrown into its biggest Energy Crisis in decades, with natural gas supplies from Russia reducing and becoming volatile and unpredictable. Now, those supplies have come to a complete halt, driving the price of oil and gas globally sky-high. 

There are several possible immediate solutions to the Energy Crisis. The Government initially proposed nationalising energy companies to reduce bills and encourage companies to make homes more energy efficient and move from fossil fuels to renewable energies. Nationalisation is the process of taking privately-controlled companies, industries, or assets and putting them under the control of the Government. There have been calls to nationalise some or all of the UK energy markets, which have gained traction as a potential remedy to crippling consumer bills, but how effective would these measures be? In The Guardian, Alex Lawson argues that French, Swedish, and German families benefit from public ownership of electricity. If we set up our own UK energy state-owned enterprise, we can also enjoy lower bills and home energy improvements, all paid for by the Government. Doing so can ensure a safer future for our future generations. Lawson backs up this argument, noting, “the TUC research argues that public ownership of generation firms has allowed European nations to keep down prices, reinvest in communities and deliver on industrial strategy. However, critics may point to the nearly €10bn sum the French Government has had to pay to nationalise its energy sector fully”. 

The significant benefit of the Nationalisation of energy companies is that these nationalised companies can be better coordinated with a better strategy as they are all working together to develop their plans, which is hugely beneficial during national crises. The next significant benefit is that the Government can guarantee the production and supply of energy, making the country less susceptible to a problem as they know how much they can make and how much they can produce. 

But there are also some drawbacks; for example, there is no profit incentive which may result in a loss of efficiency and a rise in inefficiency compared to the private sector. 

A second potential solution would be a Windfall Tax. The impulse to levy “windfall taxes” is powerful today because Russia’s invasion of Ukraine has caused oil and natural gas prices to rocket and shift wildly, giving the perception that firms are profiting from bloodshed. Governments, having run up enormous debts during the pandemic, must now find more cash to protect poor consumers from rising energy bills and to boost defence spending. There are also many drawbacks to implementing a Windfall tax. It deters foreign investment into the UK, as investors will be uneasy about investing in energy companies such as BP because the Government could use the windfall tax when the business gets profitable. 

Therefore, it does not make sense for foreign investors to persevere through bad times, but when the business profits rise, the Government takes away a more considerable portion. This is very significant as it limits the economic development in this specific sector as the Government can use a finite amount of capital on these companies. 

Secondly, there will be an impact on private pensions. Critics of windfall tax say that older people could suffer as many pension funds own shares in energy companies and therefore benefit from profits through dividends. Still, with reduced profits, the share value drops meaning less money is circulated to the shareholders through dividends. 

To avoid future energy crises and shift to a net carbon-zero energy mix over the long term, the UK must begin carefully phasing out carbon-based fuels. This will have the additional benefit of reducing our reliance on fossil fuels from unreliable foreign sources (e.g., Russia). I recognise that renewable energy cannot immediately replace certain fossil fuels, and therefore we must utilise certain transition fuels (e.g., natural gas). 

We should consider other initiatives that can make a difference in the long term. First, consumers can become more energy efficient by changing small individual behaviours, for example, using public transport, improving domestic insulation, and reducing meat consumption, all of which reduce their carbon footprint. Second, if we can use global diplomacy more effectively, it would be a helpful tool to reduce the risk of energy crises triggered by foreign political and military crises. The ideal scenario is to balance self-sufficiency with continued connection to the global economies to keep up with energy demand. 

In conclusion, while short-term changes like nationalisation and windfall taxes may seem appealing, I believe the critical aim should be to tackle long-term factors affecting the UK’s supply and demand for sustainable energy. The UK needs to ensure stable political relationships with other countries, increase investment in transition fuels, and invest in clean energy sources that we can switch to in the near future. All these changes are fundamental to ensure the UK has a more resilient and fairer energy policy going forwards.