High energy prices are likely to persist globally for at least the next 6–12 months, even under the most optimistic geopolitical scenarios, according to the International Energy Agency (IEA). In March this year, Fatih Birol, the Executive Director of the IEA, stated the current oil and gas shortage is larger than the two 1970s energy crises plus the energy crisis of 2021–2022 combined. Since his statement, the current shortage has only increased in size.
The UK is particularly exposed. The International Monetary Fund has recently stated the UK is likely to suffer some of the highest end-user energy costs, much like we did in 2021. Structural factors—mainly the fact that our domestic heating and our electricity grid are highly dependent on gas, as well as relatively low levels of insulation in our homes and limited gas storage capacity—mean the UK is more exposed to gas prices than most comparable economies.
The UK’s structural dependence on gas is largely attributed to our (brief) legacy as a gas giant in the 1980s and 90s, when North Sea oil and gas were developed. After the 1970s oil and gas crises, which sent most western economies into recession, many European and Asian countries invested to reduce their reliance on oil and gas, with large-scale roll outs of heat networks, home insulation, heat pumps, nuclear and renewables. The UK on the other hand, with its temporary abundance of gas in the North Sea, didn’t invest in this way at such a large scale. And now we find ourselves much more impacted by global gas prices than many of our peers.
We are also increasingly dependent on gas imports. 90% of the UK’s viable North Sea gas has already been extracted and sold. The North Sea basin was never very large and we mined it very intensively in the 80s and 90s. The costs of extracting the remaining 10% are rising sharply. In the late 2000s, the UK was importing around 50% of its gas, up from virtually zero in 2000. Government projections at the time suggested gas import dependency could rise to nearly 90% within a decade.
Looking to the future, the UK has made good progress on renewables more recently as we start to exploit our domestic wind energy reserves, the second largest in the world. If it weren’t for our wind and solar power the UK would have had to import nearly twice as much liquefied natural gas last year.
And, in potentially more good news, the Chancellor Rachel Reeves has recently announced a large investment in small nuclear modular reactors. This may borrow from France’s example, where a large fleet of nuclear power stations operated by Electricite De France (EDF) provide France with some of the lowest electricity rates in Europe.
The UK might be slowly learning the value of energy independence, if only too late to avoid the costs of the current crisis. The UK’s Climate Change Committee estimated just one fossil fuel price spike of the size seen after the start of the war in Ukraine in 2021 would cost the UK more than the total cost of achieving net zero…
In any case, for housing providers operating heat networks, gas and energy prices are not an abstract high-level issue, they are a direct financial risk that needs to be proactively managed.
Read more: Local heat, stable bills: how heat networks protect UK households from global energy price shocks
High energy costs (high risk – already occurring)
High wholesale gas prices are already feeding through into commercial energy contracts and are expected to persist for at least the next 12 months.
Unlike domestic customers, housing providers are commercial customers and they are not protected by the government price cap on domestic energy. While temporary and smaller scale relief schemes were introduced for commercial customers during the 2021–22 crisis, there is currently no guarantee of similar support at the same scale.
For heat networks, this means price hikes can quickly translate into increased operating costs and resident charges and tariffs.
Supplier insolvency (moderate to low risk)
During the last energy crisis, the UK saw a wave of supplier failures, with the number of commercial energy suppliers dropping from around 70 to approximately 20.
When commercial suppliers became insolvent, their customers were often moved automatically onto a supplier of last resort. Usually this meant a move onto sky-high open market wholesale rates, with little warning.
This risk is lower today. The remaining market is dominated by larger, better-capitalised suppliers that are more resilient to price shocks. However, smaller providers still carry some risk, and due diligence remains important.
Gas and electricity shortages (very low risk)
While the UK is still very dependent on gas for electricity and heating, particularly in the winter, the blackouts of the 1970s were largely driven by the miners’ strikes, rather than the global energy crisis. The government today has gas rationing strategies that protect households and essential services in a worst case scenario. While contingency planning for outages is always good practice, widespread blackouts are not currently considered a significant risk.
Your exposure to the crisis will depend heavily on your current energy contracts situation.
Many providers are revisiting their contract strategy in light of the 2021 crisis and recent events.
With that said, switching strategies is not always straightforward.
Moving to a multi-year flexible contract may trigger a Section 20 consultation requirement if leaseholder cost recovery meets a certain threshold, which can be quite likely with multi-year contracts. Energy suppliers rarely offer 1-year flexible contracts to housing providers.
While dispensations for Section 20 consultation are commonly granted due to the time-sensitive nature of energy procurement, the process can still take several months.
Additionally, adopting a flexible strategy may require appointing a new energy broker, further extending timelines.
This means decisions often need to be made well in advance of a contract expiring.
While procurement strategy is critical, it is only one part of the picture.
Well-designed, efficiently operated heat networks reduce overall gas consumption—directly limiting exposure to wholesale prices. Investment in optimisation, controls, and performance monitoring can therefore provide a structural hedge against future energy shocks.
Engage with your energy broker
You should urgently review your current position and forward strategy:
If you are on a flexible contract:
If you are on a fixed contract:
Communicate with residents
Transparency is key. Providers should:
Early communication helps manage expectations and reduces the risk of dispute.
Brief senior leadership
Ensure leadership teams are fully aware of:
Like the last crisis, this current energy crisis is not a short-term disruption, it is a long-term price shift that is expected to last well into next year.
For housing providers, the combination of procurement strategy, operational efficiency, and proactive communication will be critical in navigating this period.
Those who act early and strategically will be best placed to protect both their organisations and their residents from the worst impacts.
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