Energy crisis: How worried should we be about the lights going out?

Published

3 years ago

October 6, 2022

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The latest information on the risks facing gas and electricity supplies suggests there is an increased risk of blackouts this winter – but they can be prevented.

National Grid’s Electricity System Operator’s (ESO) updated report on the pressures facing power generators revealed contingency plans for three-hour blackouts in areas where gas-fuelled power falls short of demand.

A separate National Grid Gas Transmission study suggested that the country would be relying more on LNG (liquefied natural gas) supplies from the US and Qatar this winter.

That is because of uncertainty over whether traditional EU imports would be available because of the squeeze on supplies in the bloc following Russia’s war in Ukraine – intensifying pressure on the UK power grid as a result.

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Here, Sky News examines the pressures on UK supplies, what may be done to help keep the lights on and just how perilous the country’s situation could become if a prolonged cold snap arrives.

How worried should I be about the outlook reports?

There is no getting away from the fact that these updates make for worse reading that the “early view” released by the ESO in July.

Then, it did not foresee the prospect of the lights going out, despite obvious pressure on supplies across Europe.

Thursday’s warning could not be starker, which is why they hope the risk of blackouts can be averted through an energy-saving scheme that will pay households not to use electricity-heavy products during peak hours and keep five coal-powered generators, that would otherwise have closed, open and on standby. More on the energy-saving scheme later.

Why is gas the main concern?

Gas-fired power stations account for more than 40% of UK electricity generation while gas is also responsible for heating the vast majority of homes.

Natural gas supplies have been severely disrupted since the war – forcing wholesale prices up and threatening much of continental Europe with shortages as most, such as Germany, have previously relied on gas from Russia.

While the UK holds its own in the warmer months, thanks to a mix of nuclear, wind, North Sea gas output and imports from Norway, Qatar and the US, we tend to lean more on the continent during winter to balance the gap between supply and demand.

This is because we lack gas storage.

But we have more gas than we need…

It’s true. Currently.

The UK has been exporting gas at record volumes since late spring to help EU nations fill their storage after Vladimir Putin turned off the taps.

The lack of gas storage, however, means that we tend to rely on imports in times of high demand such as winter.

Only 70% of British gas supplies last time around came from the North Sea and Norway. It meant that supplies via ship of LNG and from the continent accounted for the rest.

What are the main threats?

The big one has to be, energy experts agree, the risk of a prolonged cold snap.

Unplanned power station outages too, as well as the inability to import electricity from Europe if there are, for example, nuclear power plant outages in France or gas shortages across the continent. Gas shortages will reduce the ability for EU countries to generate electricity.

The Gas Winter Outlook saw the potential for the shortfall in gas supplies within continental Europe to impact the UK’s ability to secure imports, should they be required.

As a result, it saw LNG acting as the primary source of supply flexibility during the winter months.

“In the unlikely event there is insufficient gas supply available in GB to meet demand, and should the market be unable to resolve the resultant imbalance, we have the tools required to ensure the safety and integrity of the gas system in the event of a Gas Supply Emergency.

“All possible measures would be taken to minimise the extent to which we use these tools”, National Grid said.

What are those possible measures and what is a Gas Supply Emergency?

A Gas Supply Emergency can be activated in stages if suppliers are unable to guarantee gas for homes and businesses.

It could mean that some customers, starting with the largest industrial consumers, will be asked to stop using gas for a temporary period.

On the power side, the ability for coal-fired power stations to restart generation has been retained, the ESO previously announced, to help cover any imbalance between supply and demand for electricity.

It has been utilised, most recently, early this year because of poor wind power generation – due to a lack of… wind.

So what does this all mean for the lights?

The message seems to be that the lights should not go out – but we need your help to achieve it.

The “demand flexibility service” will run from November to March and households can sign up via their energy supplier.

In return for not charging your electric car or running dishwashers, tumble driers or washing machines during times of peak energy use during the day, you will be paid.

It is expected to be implemented 12 times, whatever happens, to ensure people get rewarded for being part of the scheme.

It is hoped it will deliver 2GW of power savings to balance supply and demand, preventing any disruption.

Has anything like the ‘demand flexibility service’ been done before?

Yes, on a big scale for industrial users of energy. Companies can be paid not to use power during times of increased demand in order to balance electricity supply and demand.

A small-scale trial of incentivising households to reduce electricity at peak times was carried out earlier this year with energy company Octopus Energy.

From that trial, the National Grid has been able to say, “we successfully proved the proof of concept for a demand flexibility service”.

Work has been going on between the National Grid, suppliers, aggregators and consumer groups to scale up to making demand flexibility a national service.

Has this been done before anywhere else?

Countries across Europe have been working on plans to reduce their electricity demand.

Just last month France‘s national grid operator said it might have to ask households, local government and businesses to reduce their consumption at peak times. It aims to reduce electricity use by 10%.

Germany has planned to reduce its gas usage by 2% through a range of public and private measures. From last month most public buildings have not been heated above 19C, public monuments have not been lit up and heating private swimming pools has been banned.

Will electricity prices come down?

Not yet. The ESO said on Thursday that, notwithstanding the mitigation measures, it is “highly likely” that the wholesale price of gas and electricity will remain “very high” throughout winter.

Business

Budget 2025: Are you a winner or loser?

Published

2 hours ago

November 26, 2025

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Will you be better or worse off than you were before Chancellor Rachel Reeves announced her tax and spending plans in her long-awaited budget?

From the minimum wage and scrapping of the two-child benefit cap to ISA caps and tax threshold freezes, Niall looks at how the budget will impact you with personal finance expert Iona Bain.

Producers: Tom Gillespie and Araminta Parker
Editor: Wendy Parker

Business

Budget takes UK into uncharted territory to allow spending spree

Published

7 hours ago

November 26, 2025

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Budget takes UK into uncharted territory to allow spending spree

In at least two respects – one expected, the other not – this was a historic budget.

The bit no one expected came just before midday. Normally on budget day, the documents containing all the measures and the official forecasts from the Office for Budget Responsibility (OBR) are published online when the chancellor has finished her speech.

The minute she sits down in the House of Commons, traders, journalists and economists around the country start frantically refreshing their browsers, hoping for first sight of this critical document.

It’s critical because often there is a striking gap between what the chancellor says in her speech and the details inside the document.

Money latest: What the budget means for your money

Take, for instance, one of the chief money-raising measures in this year’s budget: the decision to limit the amount of money people can put into salary sacrifice schemes – something that affects most private sector pensions.

To judge from the chancellor’s speech alone, you might have thought this was a somewhat minor move designed to close a loophole used mostly by wealthy people. But the document shows that, on the contrary, this is a massive tax-raising measure that will bring in a whopping £4.7bn the first year it’s properly instituted.

That is a lot of money – a lot. And whenever the government raises those kinds of sums it invariably means a lot of people will end up paying quite a bit more money in tax. So you see the point: it’s only when you get the final document that you can see the grisly details in black and white.

And those details are more than academic. The contours of the numbers contained in the OBR’s Economic and Fiscal Outlook (EFO) – to give it its proper name – are enormously market-sensitive. They are sometimes the evidence base upon which gilt traders decide whether or not to invest in UK securities.

All of which helps explain why, when the OBR accidentally published its EFO online, nearly an hour before the chancellor stood up to deliver her speech, it caused an extraordinary flurry in markets.

The cost of government debt yo-yoed dramatically as investors hurriedly downloaded the documents and tried to work out what this budget meant for the UK economy.

This was the biggest budget leak in history and doubtless we will hear more in the coming weeks about how it happened and about the consequences. But, as I said at the start, it was not the only historic thing about this budget.

Because it also commits the government to a set of economic policies that take Britain into uncharted territory. The total level of taxation in the UK was already high before this budget – indeed, it was already heading up to the highest level in at least 70 years (actually it’s really the highest level ever – it’s just that the numbers only go back to the 1940s). But this budget supercharges the rise.

As a result of the policies contained in it, as well as the ones in last year’s budget, this parliament is, according to the Institute for Fiscal Studies, heading towards being the biggest tax-raising Parliament in modern history (the numbers in this case only go back to 1970).

Those higher taxes were, the chancellor judged, necessary for two reasons. First, they help her meet her fiscal rules, which in turn means investors begin to charge Britain less to borrow. And the early signs on this were promising: the yield on UK government debt dropped in the hours after that initial OBR-fuelled roller-coaster.

Second, they give her enough money to finance extra spending, much of which is going into extra welfare, in part to fund the abolition of the two child benefit cap. In short, this government is taxing more to spend more.

That raises at least two questions. First, how successful will it actually be in raising those taxes? After all, Britain has never been as highly taxed as it will be at the end of this decade. Will Britons be content to become a high tax economy – like many of our European neighbours – or is the government being too sanguine about what this will mean for growth and, more to the point, its coffers.

Second, having spent much of its first 18 months trying and failing to control welfare spending – forced along the way into U-turns over its plans – can it really be depended on to keep to its expenditure plans off into the future?

The short answer is: no-one really knows. But now that the flurry of excitement over that historic leak is over, this big budget will be thoroughly scrutinised and thoroughly tested in the coming weeks and months.

Business

Budget 2025: The key points at a glance

Published

8 hours ago

November 26, 2025

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Chancellor Rachel Reeves has unveiled the long-anticipated budget.

It comes after a report from the Office for Budget Responsibility (OBR), which analyses policies decided on by the chancellor, was published early in error.

Here are the key points:

Tax thresholds will be frozen for an additional three years from 2028

The point at which people start paying higher rates of tax will be held. It can mean earners will be dragged into higher tax bands when they get a pay rise.

This will raise £8bn.

Taxes hiked on gambling

The gambling industry is going to be taxed more, to raise more than £1bn.

Remote gaming duty will rise to 40% from 21% while online betting tax will rise from 15% to 25%.

The bingo tax is being abolished from April.

New mileage-tax on electric cars

Electric car drivers will be subject to a 3p charge for every mile they drive.

Plug-in hybrid vehicles will be charged 1.5p per-mile.

This is expected to raise £1.4bn, according to the OBR report.

Change to capital gains tax for employee ownership trusts

Capital gains tax relief on business sales made to employee ownership trusts will be reduced from 100% to 50%.

This is expected to raise £900m.

Other tax hikes

The tax paid on dividends – payments to shareholders – as well as property and savings income will rise 2 percentage points, raising £2.1bn.

Two-child benefit cap scrapped

The government will scrap the two-child benefit cap from April 2026.

This currently limits the amount of benefits parents can claim for their third child or subsequent children who were born after 6 April 2017.

By scrapping the cap, the government hopes an estimated 450,000 children will be lifted out of poverty.

According to the OBR’s analysis of the chancellor’s budget this will cost the government £2.3bn.

Salary-sacrifice pension contributions above £2,000 to face national insurance

From April 2029, national insurance will be charged on salary-sacrificed pension contributions above an annual £2,000 threshold.

This will raise £4.7bn and will come into effect in 2029.

State pension increases

There’ll be an increase of £440 per year for the basic state pension and an increase of £575 per year for the new state pension.

Reforms for cash ISAs

Savers will only be able to put up to £12,000 into cash ISAs tax-free each year. This is reduced from £20,000 in the hopes that Britons will instead put their money into stocks and shares ISAs.

Over 65s can retain the full £20,000 allowance.

Fuel duty to be frozen until next September

The duty, or tax, paid on diesel and petrol has been frozen at 52.95p per litre.

This will cost the government £2.4bn next year and £900m each year after.

Mansion tax introduced on properties worth more than £2m

It means the most expensive properties in the country, worth more than £2m, will have to pay extra. This will be £2,500 for properties worth £2m to £2.5m and up to £7,500 for homes valued at £5m.

This will raise £400m, the OBR has confirmed.

Cut in energy bills

The average annual energy bill will be cut £150 from April by reducing levies.

The Energy Company Obligation (ECO) scheme, which is designed to tackle fuel poverty and help reduce carbon emissions, will be scrapped.

Luxury cars removed from the Motability scheme

This scheme, which provides subsidies for people with a disability to lease a vehicle, is part of PIP.

Freeze on student loan repayment rate

The student loan repayment threshold will be maintained for three years.

Training for apprentices under-25 free at small companies

A new Youth Guarantee will give £820m towards tyring to guarantee every young person a place in college, an apprenticeship or personalised job support.

After 18 months, 18-to-21 year-olds will be offered paid work instead of benefits.

Wider inheritance tax rules

A change to inheritance tax will allow the transfer of 100% relief allowance between spouses.

Uber and Bolt journeys to be taxed

Journeys taken on ride-hailing apps such as Uber and Bolt will be subject to tax in a measure being described as a taxi tax.

Rail fares frozen

Rail fares will be frozen for the first time in 30 years, with passengers not paying any more for season tickets, peak return and off-peak return tickets between major cities.

Business rate changes

Business rates will be reduced for 750,000 retail, hospitality and leisure properties, which will be funded by an increase on premises worth more than £500,000.

The tax reduction will be paid for by an increase in taxes on properties worth £500,000 or more, like the warehouses used by online giants.

Stamp duty break for companies new to London Stock Exchange

A stamp duty holiday for companies newly listing on the London Stock Exchange will be in place for three years.

OBR forecast

Next year, economic growth is expected to be lower than the OBR thought in March. GDP will be 1.4% in 2026, down from a previously anticipated 1.9%.

It will be 1.5% for the rest of the decade.

According to the independent forecasters, prices are expected to rise faster than the OBR thought in March due to higher wages and food costs.

Inflation will be 3.5% this year and 2.5% next.

The amount of fiscal headroom the chancellor has doubled to £22bn in 2029-30. This means a £22bn financial cushion against price shocks such as the COVID-19 pandemic and soaring energy costs.