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Gas price surge – what does it mean for solar and storage?

22 September 2021

The recent global price spike in gas and its impact on the UK electricity market, in particular, has shown how exposed to volatile fossil fuel prices consumers and businesses are. If you add Britain’s particularly brittle retail electricity supply market and high levels of fuel poverty to the mix, it becomes a full-blown political crisis.  

But what does this mean for solar? Essentially the crisis reinforces most of the main reasons for investing in renewables: solar and energy storage especially. 

First, this is a clear warning sign that the UK needs to reduce its dependency on gas as a matter of urgency. Solar and wind are now the lowest costs ways to generate electricity, so the quicker we get renewables onto the grid, they will displace expensive, high carbon gas. It is also true that solar thermal plays a role in decarbonising heat, which will be good for carbon reduction and delivering low-cost power for consumers. 

Second, investment in solar and storage will help mitigate against periods of low wind. Whilst not a perfect correlation, of course, when the country is experiencing high pressure and the wind drops, the skies are often clearer, increasing solar output. Battery storage and longer duration storage, like green hydrogen, alongside flexible demand, will also be required in a system where variable renewables are dominant. The investment case for storage gets more compelling in a volatile market, and it is far quicker to deploy than some of the ‘firm power’ options proposed, like nuclear or carbon capture. We know there are 20GW of solar and 20GW of storage projects being developed already that need to get built soon to complement the growth in wind. 

Third, the market for corporate PPAs is likely to be strengthened as we see the impact of volatile gas prices. More finance directors will be drawn to the idea of stable long term energy prices that can be guaranteed with onsite generation or buying from a renewable generator. 

Finally, the same can be said for residential solar and storage. Rising fossil fuel prices will make the payback for solar and battery storage investment shorter, especially when considering the electrification of transport and heat.  

In an uncertain world, the predictability of solar to power your home, charge your car and keep you warm will become ever more valuable. We are seeing the beginnings of the death throes of the fossil fuel economy, and it is vital that policymakers and investors alike take this a sign to accelerate the energy transition, not try and patch up the status quo.   

By Chris Hewett, Chief Executive at SEUK.