Relying on fuel imports risks energy stability

Without clean power, the UK grid remains exposed to gas import shocks

To shield British consumers from future gas price volatility, the UK Clean Power 2030 Action Plan aims to decrease gas imports for electricity generation. As UK fossil fuel production continues its long-term decline, reducing demand is critical to limit import dependence.

Reliance on fuel imports exposes the UK to cost rises and tariffs

Recent global volatility across oil, gas and biomass prices shows the benefits of homegrown, clean power generation. The UK is overreliant on fuel imports for energy generation, leaving it exposed to price shocks.

Import dependence leaves the UK vulnerable to rising costs and tariffs

In total, 45% of gas supply, 44% of oil products such as diesel, and around 95% of wood pellets are imported in the UK. These fuels are not only used for electricity generation but also in transport, heating, and in industry. The UK’s reliance on these imported fuels leaves it vulnerable to price fluctuations, which are set by global markets.

The 2021-2022 energy crisis is still affecting consumer energy bills, as generating electricity using gas remains 88% more expensive than the pre-crisis average. Overreliance on gas, which is used for electricity system balancing and for heating around 80% of homes, has led to lasting energy bill increases. Although UK wholesale power prices have reduced since the 2022 peak, the cost of generating electricity using gas is once again increasing, having risen by a third (33%) across 2024.

The UK’s use of LNG (Liquified Natural Gas) import shipments also exposes the UK to competing trade complications. The UK receives its gas imports from two main sources: pipeline gas from Norway, and LNG from the USA, Qatar and other countries. Overall LNG imports made up a fifth of the total gas supply, and during the energy crisis LNG imports increased, to be re-gassified and exported to Europe. However, LNG is also typically more expensive than pipeline gas, with the market more competitive. Reduction in gas demand through clean power deployment may mean reduced exposure to LNG markets, though with tariffs on China-US LNG trade announced there may be increased volatility in the market which has also seen price increases across 2024. Reliance on LNG imports means that the UK is exposed to international political volatility and market constraints. 

The price of generating power using gas has risen consistently over the past 12 months, while continuing competition and tariffs on LNG trade threaten market stability. Although gas is currently important in balancing the UK electricity system, its cost and volatility have serious implications for energy security. Reducing demand is therefore a critical component of building energy system stability going forward.

Fossil fuel and biomass generation must fall to cut import dependence

With production of oil and gas in long-term decline in the UK, homegrown power sources are critical to reduce import reliance and build stability in the energy system. Reducing demand for import-reliant fuels such as biomass and gas builds long-term energy security.

Fossil fuel demand reduction is critical as production is in long-term decline

The UK’s oil and gas production is in long-term decline, with a 68% drop between 2003 and 2023. Without an equivalent reduction in fossil fuel demand, UK exposure to import price shocks is set to increase.

Since the first UK offshore oil fields were discovered in 1975, new finds have been smaller and harder to extract, while older fields produce less over time. As a result, overall production is declining. Although energy demand has also fallen, it has not decreased as quickly as production, meaning that import reliance has increased. To reduce reliance on fuel imports therefore, the UK needs to cut overall demand for oil and gas. This can be achieved through improved energy efficiency, expanded renewable generation and clean electrification.

Despite coal phase-out, the UK remains reliant on imports of oil, gas, and biomass. In total, the UK imports 40% of its energy supply, exposing its economy to price shocks. Despite the decline of coal use in power generation and industry, the UK remains heavily reliant on the remaining imported energy fuels. Oil and oil products, such as petrol and diesel, are the largest imported energy fuel in the UK, followed by gas and bioenergy, which overtook coal as the UK’s third most imported fuel in 2019. Collectively, oil, gas and bioenergy comprise 86% of the total energy supply in the country. These three are used in electricity generation but also as fuel for transport, heating and industry, meaning that import reliance can be tackled by action across each of these sectors.

Transport fuel prices have been highly variable over the last four years, impacting homes and commercial users in the UK. Overall, 44% of petroleum products used by UK consumers are imported on average. Oil is imported in two broad forms: as raw primary oil and as refined petroleum products. Once refined, oil petroleum products are mostly used in the transport sector (80%), which is the largest consumer of UK energy and almost entirely relies on petroleum fuels for supply. The rest goes to other sectors like homes and industries, including the plastics industry.

Bioenergy is the third largest UK import and is increasingly used across the economy in power generation (56%), home heating (22%), as well as transport fuels and gas grid injection (22%). However, it also has a range of cost, carbon and energy security impacts. Wood pellets have a high carbon intensity, and when burned at large volumes can have significant impacts. Drax power station was the UK’s largest CO2 emitter in 2023 and paid a £25 million penalty last year after an Ofgem investigation into its failure to accurately report on the type of wood used. Plant biomass, including wood pellets, is the largest component of bioenergy use and is mainly (74%) used to generate electricity. Overall, 95% of wood pellets used in large-scale biomass power generation are imported, as demand far exceeds national production.

The UK is currently overreliant on fuel imports, and new oil and gas discoveries will make only a marginal contribution to slowing the decline in production. Building an energy system that is both stable and flexible means a reduction in fossil fuels and biomass generation, an acceleration in clean power development, and support for new technologies such as energy storage and interconnection with neighbouring countries.

Power imports have an important role to play

Flexible power supplies are critical to support energy stability. Interconnectors with neighbouring countries allow the UK to export power when it has excess, and import power from the continent when the UK needs it. These long-distance cables have a stabilising effect on power prices. 

Power imports make up a small but important part of the electricity system

The UK trades electricity through long-distance interconnectors with many of its neighbours, although the volume of energy is small, these interconnectors can play an important role in balancing the power system. The UK imports 5% of its yearly electricity supply on average, over the past 10 years (2013-2023). 

Interconnector flows are market driven and typically reflect the cost imbalance in power prices between European neighbours. In 2022, Britain became a net electricity exporter for the first time in over 40 years, as supply was increased to France due to maintenance at multiple nuclear power plants in France, reducing generation. 

Interconnectors provide a flexible resource to balance variable renewable generation, aiding system stability. Although the UK currently has higher wholesale electricity costs than many of its interconnected neighbours, as UK renewable energy deployment continues the wholesale power price is expected to gradually reduce, albeit at a slower rate than they increased during the recent energy price crisis. Therefore, the role of interconnectors may change over time, from providing flexibility to the UK power grid, to also facilitating increasing levels of power exports to the rest of Europe.

Therefore, although the UK does rely on electricity imports for a part of the power supply each year, these have a balancing effect on power prices – rather than exposing the UK to increased price shocks in the way that other import reliance does. Furthermore, the UK is forecast to become a net exporter of electricity by 2030 in the NESO 2030 Clean Power report.