Gas prices have soared to record levels over the last year as higher global demand has been intensified in Europe.
Sean Gladwell | Moment | Getty Images
LISBON, Portugal — The U.K. should embark on a “vaccination-style” effort to address surging energy prices and prevent future energy crises from happening, according to the boss of gas and electricity supplier Ovo Energy.
The average U.K. household faces paying a £2,500 ($2,900) annual bill for the next two years, up from £1,400 in October 2021. That’s even after a cap on consumer energy bills was imposed by the government in early September.
Ovo CEO Raman Bhatia called for action of a similar scale to that of the country’s rollout of Covid vaccines, an initiative core to its lockdown exit strategy.
“There needs to be a very active intervention, vaccination-style,” Bhatia said onstage at the Web Summit tech conference, in a fireside chat moderated by CNBC.
In Europe, a combination of cold weather, oil and gas shortages stemming from Western sanctions on Russia over its invasion of Ukraine and a resulting surge in prices has threatened to upend lives and businesses.
The crisis has its roots in the Covid pandemic as the reopening of economies led to a sudden energy demand surge. Already, people are struggling to pay their energy bills, while some have refused to pay.
In the U.K., the government sought to alleviate pressure on households and businesses with its rebate program which gives people a £400 discount on their energy bills. The program is due to expire in April 2023.
Bhatia said he expects the grants to be continued beyond that deadline, and added that further support is needed “to include the squeezed middle, who are facing a debt crisis for the first time” in the face of rising interest rates.
“What we as a sector expect [and] what I would expect is some sort of support to continue beyond April so that we don’t end up with a cliff edge,” he said.
Between July 2021 and May 2022, 29 U.K. energy suppliers — including Bulb, once the seventh-biggest — have collapsed. Ovo had warned before the arrival of government support that it may not be able to meet its lending commitments this year.
After a deal to acquire the retail arm of Scottish firm SSE Energy, Ovo became the second-largest supplier of energy to households in the U.K.
Bhatia called for further support for retail energy customers in the U.K., as well as a national drive on insulating homes.
“We have the draftiest, leakiest homes in Europe,” Bhatia said.
His comments echo calls from Insulate Britain, a recently launched protest group, to ensure homes are insulated to be low energy by 2030.
Bhatia said that 75% of homes in the U.K. are inefficient as they don’t meet insulation standards.
“We have to go on a drive to insulate every single home so that, come next winter, we are in a much better place,” Bhatia added.
Energy industry executives have warned that, as difficult as the coming winter may be for consumers, it’s really the winter of 2023 people should be worried about.
The crisis has exposed Europe’s dependence on fossil fuels, particularly gas from Russia.
Bhatia said that highlights the importance of transitioning to renewable energy.
“I think energy transition is real. And the near term costs of energy transition have gone up. But the long term opportunity has become even more pressing and urgent,” he said.
There are ways individuals can improve their energy efficiency, he added, including installing smart meters and air source heat pumps and using apps to measure and control power consumption.
“I think everyone needs to play a part,” he said.
Countries are under pressure to come up with solutions to the climate crisis at the COP27 summit in Egypt this week.