A new study has highlighted the economic consequences of Wales’s continued dependence on volatile global fossil fuel markets, as the conflict in Iran sparks fears of another energy price crisis.
New analysis by the Energy and Climate Intelligence Unit (ECIU) has found that the energy crisis which followed the Russian invasion of Ukraine in 2022 cost the Welsh economy £5.65 billion – more than three times as much as the Welsh Government intends on spending on education over the next year (£1.8 billion).
The International Monetary Fund (IMF) has said that Britain’s acute dependence on imported fossil fuels left it the worst hit economy in western Europe by the spike in oil and gas prices which began as world economies emerged from Covid lockdowns in 2021 and which was turbocharged by the invasion of Ukraine the following year.
The Energy Crisis Commission has also warned that the UK as a whole remains “dangerously unprepared” for future price shocks.
The effects of that energy price crisis continue to be felt by households across Wales, with the ECIU finding that excess costs to households have reached £3.14 billion – averaging £2,285 per home. Residents in some of the most deprived areas of Wales, where average household incomes are lowest – including Blaenau Gwent, Merthyr Tydfil, Rhondda Cynon Taf, and Newport – have paid a greater proportion of their income on excess energy costs than households in more affluent areas of Wales.
According to polling by More in Common, six in ten voters (63%) believe that the cost of the living is the biggest issue facing Wales as the country prepares for Senedd elections on May 7th, with nearly eight in ten (77%) saying that energy costs were the issue causing them to be most concerned about the cost of living.
The analysis also highlights the particular vulnerability of Welsh industry to volatility in global energy markets, finding that industrial energy consumers have faced nearly £1 billion (£0.95 bn) in additional costs since 2022. Manufacturing hubs in Flintshire and Wrexham have been the worst hit, shouldering excess costs of around £353 million.
Plaid Cymru spokesperson on energy and the economy Luke Fletcher MS, and fuel poverty spokesperson Sioned Williams MS, said:
“This important report highlights what people across Wales are already feeling daily; that the energy crisis is hitting them hard. The fact that Welsh households have paid £2,285 per home in excess direct costs because of spikes in oil and gas prices, disproportionately hitting our most deprived communities, underlines that a shift towards renewables is needed to bring down prices for households and businesses, reduce our exposure to the price shocks of fossil fuels, and help tackle anthropogenic climate change.”
Labour Member of the Senedd for North Wales, Carolyn Thomas, said:
“This is a sobering report, and one that policymakers across the UK must take seriously. The evidence is clear: dependence on fossil fuels is bad for people’s pockets, bad for energy security, and bad for our environment. The lesson now must be to accelerate the transition to clean, home-grown energy so that Wales is never left this exposed again.”
Laura Emily Dunn, Senior Associate at the ECIU, said:
“Wales has a rich industrial heritage, but Welsh firms have been hit hard by some of the highest industrial energy costs in Europe, driven by our dependence on gas for power generation. The closure of the blast furnaces at Port Talbot steelworks in 2024 in the midst of the energy crisis has exacerbated concerns for the future of Welsh industry – and these fears will continue to grow if the conflict in the Middle East continues to drive up global energy prices.”
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