UK announces ‘Energy Price Guarantee’, supports shale gas & oil

The newly elected United Kingdom Prime Minister Liz Truss announced an end to the moratorium on shale gas September 8, 2022 — three years after halting fracking, a controversial technique used to extract shale gas.

The announcement was a part of the government’s subsidy scheme “Energy Price Guarantee” to address high energy prices in the country amid the Russia-Ukraine war.

“We will end the moratorium on extracting our huge reserves of shale, which could get gas flowing as soon as six months — where there is local support for it,” Truss said during her address at the House of Commons.

Also, the government said it would launch a new licensing round for extracting oil from the North Sea. “This could lead to more than 100 new licences being awarded,” Truss said. 

Her government will ensure that the UK becomes a net energy exporter by 2040, she added. “We are enabling a stable environment that gives investors the confidence to back gas to our transition to Net Zero,” she highlighted.

Further, the Prime Minister announced her support for accelerating nuclear, wind and solar energy.

Keir Starmer, leader of the Labour Party of Great Britain, said that extracting from the North Sea would not materially impact the global gas price.

“If all countries squeezed every single drop out of our fossil fuel reserves, global temperatures could increase by 3 degrees,” he said, adding that this could be catastrophic for the planet.

Truss said she plans to set up an energy supply task force to negotiate long-term energy contracts with domestic and international gas suppliers.

The Prime Minister plans to set up reviews on energy regulation and how the government can meet its Net Zero emissions goals “in a way that is pro-business and pro-growth”.

Additionally, the Prime Minister said the government will cap energy bills for a typical household at £2,500 per year for two years. This will start on October 1, 2022.

“This will save the typical household £1,000 a year. It comes in addition to the £400 Energy Bill Support Scheme,” Jacob William Rees-Mogg, the secretary of state for business, energy and industrial strategy, said in a statement.

These actions, Truss said, would deliver substantial benefits to the economy by boosting growth and curbing inflation by 4-5 points, according to a press statement.

"The Energy Price Guarantee does a good job of targeting those households facing the highest energy bills but, because it is not well targeted at those on low and middle incomes, comes with a large price tag,” said Torsten Bell, chief executive of Resolution Foundation, an independent British think tank, said in a statement. 

There are other issues. Some experts raised concerns that Energy Price Guarantee does not mention costs.

“I’ve seen a lot of big fiscal announcements over the years. I’ve never seen one with NO details of paying for it,” Torsten Bell, chief executive of the Resolution Foundation think tank, wrote on Twitter.