Energy bills will remain higher for years, the boss of one of Europe’s biggest gas companies has warned.
Equinor Chief Executive Anders Opedal told the BBC that the cost of governments’ attempt to reach “net zero” emissions targets and windfall taxes on energy firms will make it hard for prices to fall.
Norway’s Equinor is one of the biggest producers of gas in the world, and supplies much of Europe’s energy needs.
The current energy crisis has seen bills for the average British household rise from around £1,300 ($1,586) to £2,500 ($3,050).
The UK government’s energy support package has capped the prices at relatively low levels. Without the support, the average annual household energy bill would have been £4,279 ($5,222) in the last three months of 2022.
Opedal said prices will likely remain higher for years to come, though they will start to fall from the more extreme level as the market adapts.
He said: “We see a rewiring of the whole energy system in Europe in particular after the gas from Russia was taken away. We need massive amounts of more renewables. We need to do the industry in a totally different way, requiring hydrogen and so on.
“This will require a lot of investment and these investments need to be paid. So I would assume that energy bills will maybe be slightly higher than in the past, but not as volatile and high as they are today.”
The energy boss added: “I think we need to treat energy as something that is not abundant. It actually has a value. I think we’ve had a lot of cheap energy in the past and we’ve probably wasted some of it. So, to make sure that we are making the right investments everyone wants to use as little energy as possible.”
Costly Net Zero Plans
The UK has signed into law a policy to achieve net zero by 2050 with the Conservative government setting out a strategy called “Build Back Greener” to decarbonise all sectors of the UK economy.
According to estimates by the UK’s Climate Change Committee in 2019, the annual cost of achieving net zero could increase over time and reach around 1 to 2 percent of GDP in 2050.
The UK’s National Audit Office (NAO) said in December 2020 that the government’s commitment to achieving net zero by 2050 is a “colossal challenge” that could cost hundreds of billions of pounds.
According to a YouGov poll conducted in November 2022, excluding “don’t knows,” 62 percent of respondents wanted a referendum on UK’s net zero policy as compared with 58 percent asked the same question in 2021, before the COP26 climate summit.
Car26, a group that commissioned the poll, is campaigning for a referendum on net zero and a pause in carbon-related regulations until such a ballot is held.
Car26 said that across all demographics, there was more support than opposition to holding a referendum.
The online poll conducted between Nov. 21 and 22 asked 1,661 people “To what extent do you support or oppose holding a national referendum to decide whether or not the UK pursues a Net Zero Carbon policy?”
Excluding “don’t knows,” 66 percent of 2019 Labour voters backed a poll, compared with 60 percent of Liberal Democrat voters and 56 percent of Conservative voters.
Lib Dem voters were the keenest, with only 15 percent “don’t knows,” compared with 25 percent for Labour and 24 percent for the Tories.
Remainers and Leavers supported a net zero referendum, at 58 percent and 61 percent respectively. Both sexes polled the same with 62 percent support.
The charging of a windfall tax on energy firms is another factor affecting prices for the long term.
The idea of a windfall tax on energy companies was proposed by opposition parties after energy prices soared following the Russian invasion of Ukraine in February 2022.
Rishi Sunak, then chancellor of the Exchequer, initially resisted the idea, warning about the impact it would have on future investment.
But he was later forced to impose the tax to fund a £15 billion emergency support package to tackle the impact of energy inflation on British households.
On May 26, 2022, Sunak announced a 25 percent profit levy on oil and gas giants, which the government expected to generate £5 billion in tax revenues.
After Sunak became prime minister, Chancellor Jeremy Hunt increased the windfall tax to 35 percent and imposed a 45 percent levy on electricity generators. The investment allowance for energy producers was also significantly reduced as part of the autumn budget.
At a meeting held in Edinburgh on Dec. 9, UK energy producers complained to the chancellor that the government’s extension of the Energy Profits Levy was “a tax too far.”
But Hunt said he had to make “difficult decisions” and those with the broadest shoulders had been asked to pay more.
Owen Evans and PA Media contributed to this report.