Kwasi Kwarteng, the business secretary of United Kingdom, has convened an emergency summit with gas industry chieftains and country's energy regulator Ofgem today in an effort to address the crisis sparked by soaring natural-gas prices, The Guardian reported.
The country's largest energy suppliers have asked the government to step in with emergency multibillion-pound bailout package, including creation of a bad bank, to help them survive a crisis caused by soaring natural-gas prices.
At least 5 smaller energy companies have gone bankrupt since the beginning of August leaving more than half a million British customers in need of a new supplier. Another four suppliers are likely to go bust before the end of the month.
Kwarteng has warned that by end of the year, only six to 10 firms could survive the crisis caused by soaring natural-gas prices.
The customers left behind by failed energy companies are reassigned to a new supplier. The bigger energy companies fear that the cost of absorbing new customers will dramatically increase their cost structure and make their business model unviable.
The U.K government could consider the option of state-backed loans to financially resilient energy companies, which can take on stranded customers,
The record prices of natural-gas in wholesale energy markets has been mostly attributed to global surge in demand following a cold winter that left gas storage facilities depleted. Economic recovery in most parts of the world has also fuelled increased in energy requirements.
Alexei Miller, the head of Russian gas giant Gazprom, said last week that natural gas prices in Europe could scale new heights due to low gas storage levels in the region.
Almost half of the UK’s electricity is generated via gas-fired power plants with over 20 million households connected to gas grid. 85% of homes in the country are heated with gas boilers.
There has been a surge in normal demand for gas power in recent months following a series of nuclear reactor outages and the recent shutdown of a major power cable that brings in electricity from France.
UK also had one of its least windy summers since 1961, further compounding the problem. About 20% of U.K's energy requirement come from wind.
Coal accounts for less than 2% of electricity. Over the year, U.K has shut down several coal plants in a bid to decarbonise its energy mix. But even the price of coal is also at record highs in global markets due to demand.
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