The 2022 Barometer tells us: There’s a triple energy crisis – UK professionals rank the price crisis as by far the greatest concern, followed by security of supply and the climate crisis. And more believe the current situation will help the energy transition than hinder it.

Each year the Energy Barometer survey asks Energy Institute (EI) members in the UK to identify the biggest challenges facing the energy industry, allowing us to monitor concerns over time. Not surprisingly, the top three challenges identified by respondents this year reflect the current worldwide triple energy crisis. UK professionals rank the energy price crisis (including price volatility and affordability) as the biggest challenge. The transition to a low-carbon energy system was ranked second, and supply security third. Sustainability and climate change (including the net zero target) was ranked as the joint 6th biggest challenge. Nearly half (47%) of respondents believe that the upward trend in energy prices will help, not hinder, the energy transition. Nevertheless, as shown later in the report, they are concerned about the impact of the rising prices on households and businesses.

Energy prices and security have consistently been identified as challenges in previous years but now rank significantly higher than last year when they were not in the top 10. Sustainability and climate change has changed places with low-carbon energy, perhaps suggesting a greater emphasis on low carbon supply sources as opposed to wider sustainability and climate targets.

Biggest challenges

The 2022 Barometer tells us: Energy efficiency is ranked by 44% of respondents as the key priority medium - and long-term response to the triple crisis - more than any other option - followed closely by building out renewables. Support is lower for new nuclear and new domestic oil and gas production. Reducing demand is the most popular option for ending imports of Russian oil.

"What are the most important action areas for the UK Government’s crisis response for the medium to long term?"

The 2022 Barometer tells us: But the demand side is neglected by recent government policy. 70% don’t see existing energy efficiency policies as having any positive effect over the past year. Nine in ten see fuel poverty policy as failing.

The past year has witnessed some new policies and initiatives aimed at improving energy efficiency of UK buildings, including the Heat and Buildings Strategy, the Social Housing Decarbonisation Fund and the expansion of the Energy Company Obligation. However, only a third of the survey participants think that UK energy policy has had a positive impact on this area in the last 12 months. 7 out of 10 indicated there was either no policy effect, or a negative effect, in improving energy efficiency.

This follows a decade of neglect or poorly designed policies in this area: including a series of home insulation initiatives which under delivered (2013’s Green Deal or 2020’s Green Home Grant), delays to the market-wide smart meter rollout, and sluggish take up of heat pumps. The UK Committee on Climate Change, in their 2021 Report to Parliament, confirmed that home insulation rates remain well below their pre-2012 peak, when key policies were scrapped. According to Carbon Brief, had those efficiency and climate policies not been scrapped by the Government in 2012, current household energy bills in the UK could have been lowered by £2.5bn. While the British Energy Security Strategy name-checked energy efficiency, it added no new policies. Similarly, policy announcements since the survey was conducted have added nothing substantial to the policy mix supporting energy efficiency.

The UK Climate Change Committee (CCC) in its 2022 Progress Report to the Parliament, concluded that despite the UK Government’s ambitious Net Zero strategy, necessary policies are not yet in place to meet the targets, especially on energy efficiency of buildings and land use. The corresponding monitoring framework shows, of 10 policies related to energy use in buildings, none are on track, or it is too early to say; energy efficiency retrofit is considered significantly off track. The CCC points out that although the Energy Security Strategy recognised energy efficiency as the solution to high energy bills as well as decarbonisation, it failed to address the policy gap in this area.

Among the areas worst affected by policy according to respondents are reduction of fuel poverty, security of energy supply and simplification of energy taxation. The areas which are seen as most positively impacted by UK energy policy are renewables, low carbon transport and nuclear.

Sentiment on all key areas of energy policy has remained static or declined in comparison to last year, except for supporting delivery of new nuclear power stations. 50% of respondents indicated energy policy has had a positive effect on this area compared to 37% in last year’s survey. This may be due to positive signals from ministers over the twelve months leading up to the survey about scaling up the UK’s new nuclear ambition beyond the current build at Hinkley Point C. Since the survey was opened, the Energy Security Strategy has committed to additional roll out of nuclear.

The need to support all of these technologies with the necessary human capital and skills is a consistent message from successive Energy Barometers, and even more so in the context of the heightened crisis facing energy. When asked this year where support should be focussed, a strong majority of the respondents (71%) point to green jobs in the home and building sector as a priority for the UK Government to underpin long-term solutions. This is followed by creating jobs in power (44%) and enabling decarbonisation of sectors (44%), as well as in business and industry (41%).

Volatile global gas prices are pushing up bills for UK consumers. The Trades Union Congress (TUC) estimates energy bills could increase 14 times faster than wages this year, adding to financial pressures for many households and businesses. Even before the Russian invasion of Ukraine, sanctions, and resulting market volatility, wholesale prices were reaching record highs. At least 26 retail energy companies collapsed between September and Deceuber 2021, affecting over 4 million customers and pushing households into fuel poverty.

Support for households and businesses

The 2022 Barometer tells us: To urgently support domestic customers ahead of this winter, a majority of respondents back subsidies for the lowest income homes, followed closely by removing VAT on energy. Support is lowest for providing a rebate to all consumers.

At the end of the winter 2021/22, amidst upward spiralling gas and electricity bills, the Barometer survey asked which are the most urgent actions that the UK Government should take to support domestic consumers through the next winter. Most respondents indicate that direct subsidies for low-income homes would be the best measure to alleviate the household energy crisis across the UK, with the cost of such subsidies socialised across all taxpayers. Nearly half of respondents also favour suspension of VAT on energy bills, and more than a third favour a one-off windfall tax on oil and gas companies. Only a small proportion (~10%) thinks that a rebate or basic free fuel allowance for all consumers should be the Government’s response to the crisis.

The Treasury has since announced a package of measures in response to escalating household bills that partly meets these recommendations. Significant relief is being targeted at low-income households, something strongly supported by respondents. However, it’s also being provided to all consumers, something not seen by respondents as a priority. The cost of the various measures is being paid for through a combination of general taxation and a ‘temporary targeted energy profits levy’ on oil and gas companies.

In relation to helping businesses manage inflated energy costs, nearly three quarters of respondents (73%) point to the need for advice and incentives to support energy efficiency. Over 60% of respondents think that the next best short-term solution for businesses is a loan scheme for clean technologies.

The 2022 Barometer tells us: Longer term, getting all homes to EPC rating of C or above is ranked joint highest for protecting households from price volatility, alongside investment in UK-based zero carbon energy sources.

"What actions should the UK Government take to deliver longer-term resilience of domestic consumers to global gas price volatility?"

Furthermore, two thirds of respondents (69%) hold an opinion that the Government should incentivise private investment in energy efficiency to protect consumers against future price volatility. It is closely followed by supporting investment in renewables and energy storage.

"Where should the UK Government incentivise private investment to protect consumers against future price volatility?"

Information campaigns

The 2022 Barometer tells us: Concerted advice and information is needed. Almost 60% look to central government to lead behaviour change campaigns to help consumers reduce demand. And three quarters believe businesses need greater energy efficiency advice and incentives to weather price hikes in the short term.

The months leading up to this report brought a proliferation of articles and analysis emphasising a crucial role for citizens in responding to the energy crisis, including for example the International Energy Agency’s (IEA) research on reducing individual demand for natural gas and oil. Respondents believe that concerted advice and information is needed to help people identify how they can best individually offset the increase in their energy bills. Almost 60% of Barometer respondents look to central government to lead behaviour change campaigns to help consumers reduce energy demand, rising to three quarters when Councils and local governments are included.

Respondents also believe that UK Government campaigns should be supported by evidence from organisations such as the Energy Institute. When asked what are the most important activities that the EI should pursue in response to the energy security crisis in the mid to long term, the largest response (35%) was that the EI should inform energy decision-making through convening expertise and advice.

36% of respondents believe that high quality advice to improve the energy performance of their homes can deliver long-term resilience to gas price volatility. For businesses, energy efficiency advice is the leading way for the government to protect against rising costs in the short term, and a quarter of respondents additionally want to see government help businesses find the best energy contracts, tariffs or suppliers.

During the 8 years of the Energy Barometer, concerns about security of supply have consistently been identified among the biggest challenges. This year it was elevated to the top three, with many respondents citing the impact of Russia’s invasion of Ukraine on energy and geopolitics.

Although, in comparison to some other major European economies, the UK is not a significant importer of Russian hydrocarbons (with only 8% of oil demand coming from Russia), the UK Government has committed to phasing out Russian oil and gas imports by the end of 2022. The EI asked respondents how best that can be achieved.  The greatest number of respondents point to reducing oil demand by scaling up energy efficiency (30%). 28% believe that the UK Government should maximise output from existing operations in the North Sea.

"How best can the UK phase out Russian oil imports in the short to medium term?"

35% of respondents claim Russia’s invasion of Ukraine, and resulting increased costs of energy, has directly affected them, their organisation’s or their clients’ financial situations. Additionally, 28% of respondents revealed that, as a consequence of the war, they have chosen to reduce heating and/or electricity use.

The 2022 Barometer tells us: Appetite is mixed on market intervention. While more than three quarters advocate reform of international hydrocarbon markets, and almost half support some form of government control of energy, only a third support a windfall tax on excess oil and gas profits.

The current crises reinforce once again that energy is a critical utility, leading to almost half (48%) of respondents asserting it should be controlled by the government and not private companies. However, nearly 30% of the respondents disagree with that statement. As outlined elsewhere, one in three are in favour of imposing a windfall tax on oil and gas companies as an urgent measure to support domestic consumers in the short term.

When asked whether there is a need for long-term reform of international energy markets, most respondents called for either radical (36%) or incremental (40%) changes. Radical reforms might include, for example, a move away from the spot prices, while incremental changes comprise reviewing regulations and subsidies. Some respondents commented that reformed markets should accurately reflect prices for renewable energy that are not set by cost of fossil fuels (“The fact that renewable energy in the UK is charged at a price relating to fossil fuels is bonkers!” according to one survey respondent), while there were also calls for international carbon taxes or border adjustment mechanism. In total 76%  were in favour of some reform of international energy markets, and this could include changes in the UK’s own market. This suggests EI members would welcome the Review of Electricity Market Arrangements (REMA) set out in the British Energy Security Strategy.

The 2022 Barometer tells us: The UK’s performance in Glasgow is given a mixed response, with future COP Presidencies encouraged to emulate successes in brokering multilateral side agreements, while putting greater effort into closing the gap between Nationally Determined Contributions (NDCs) and 1.5C.

This year’s Energy Barometer was conducted 5 months after the UK hosted the UN Climate Change Conference of the Parties (COP26) in Glasgow. The EI asked respondents to evaluate the UK Presidency’s achievements and establish what should be emulated or avoided by future holders of that position. The respondents offered a mixed assessment of the COP26 outcomes.

Brokering multilateral sectoral deals (e.g. coal, methane, deforestation, clean energy, finance) was perceived as the biggest success of the summit in Glasgow (chosen by 46% of respondents). Meanwhile, putting greater effort into closing the gap between NDCs and limiting temperature rises to 1.5C was cited by 44% of respondents as the greatest area of improvement for future hosts of the COP summits.

The 2022 Barometer tells us: Despite hosting COP26 and publishing its national strategy for net zero, confidence in meeting the UK’s own 2050 net zero target has dropped significantly. 70% don’t expect the UK to meet or get close to the target in time, compared to 54% last year.

Conversely, only 5% believe that the UK will meet its target by 2050, while last year 11% of respondents thought it possible. This is a reversal of the previously optimistic trend seen since the net zero target was signed into law in 2019.

Taking action

The 2022 Barometer tells us: The price and security crises over a backdrop of climate targets is influencing action in respondents’ own organisations. Almost half have introduced new energy efficiency or emission reduction measures over the past year; more than a quarter have reduced energy use due to Russia’s invasion of Ukraine.

The negative perception regarding the overall likelihood of reaching the UK’s net zero target is contrasted by alignment of business strategies with net zero in respondents’ own organisations. More than half are either implementing a net zero plan already or have publicly committed to doing so. This compares to 27% who have made no such commitment.

Respondents are even more proactive when it comes to practical actions to increase energy efficiency and reduce greenhouse gas emissions in their organisations. Although a small (6%) portion of the respondents claim that their companies have had robust energy efficiency and emissions reduction measures in place for a while, nearly half say such measures were introduced over the past year and an additional 10% assert that such steps will be implemented soon. Only 8% of the respondents report that there are no energy efficiency and emission reduction measures planned in their organisations.

The factors driving this level of activity are mixed but mutually reinforcing – over the past twelve months, respondents point to targets, legislation, and reporting requirements (25%), public discourse on the climate crisis including profile raising at COP26 (23%) and rising energy prices (21%).

Heat and transport

While decarbonisation of the electricity sector continues at pace, transport and heat have proved more challenging to tackle.

With regard to decarbonisation of transport, respondents were asked about their individual choices; specifically whether they have considered purchasing a hybrid or fully electric vehicle. While 17% of the respondents already own hybrid or electric vehicles, a further 40% revealed that they are contemplating such a purchase, influenced mainly by concerns for climate change and sustainability (45%) and to a lesser extent by rising fuel prices (15%).

Respondents are slightly more optimistic when it comes to decarbonisation of the UK heat mix compared with when they were asked 5 years ago. Although they still expect a moderate rather than complete transformation of the mix, the proportion of natural gas in the mix is now expected to decrease more significantly from the current ~80% to 42% in 2035. The share of heating from electricity is expected to grow from the current ~10% to 27% in 2035. Respondents are marginally more optimistic about hydrogen in the heat mix, produced from either renewable or non-renewable sources. While 5 years ago they foresaw hydrogen having only a marginal share in the 2030s of around 2%, now they expect that the share will be slightly more than 10%.

Consistently, respondents believe that proven measures and technologies related to energy efficiency will enable the greatest emissions reductions within the residential heating sector by 2035. The respondents emphasise the importance of retrofitting existing building fabric (50%), heat pumps (49%) and higher efficiency new buildings, for example Passivhaus (42%).

"What will enable greatest reductions in residential heating emissions by 2035?”"