Megawattageddon. Gasapocalypse. Energastrophe.

Call it what you will, the energy market news coming out of the U.K. paints a dystopian image of what happens when an economy, making the righteous transition to affordable, clean, renewable power, has to turn to pricey gas to keep moving forward.

As the effects of the energy transition ripples across every corner of society, Britain's experience is a cautionary tale for the rest of the world, an example of what can—and very likely will—go wrong as countries around the globe stumble on their transition to green energy.

China has already warned food security could be impacted as skyrocketing coal prices affect fertilizer supplies. In the EU, the consumer impact of the power crunch has already had political reverberations as electricity bills soar in the face of low gas reserves ahead of the winter.

But it's the U.K. where the pain hurts the most.

How the dominoes fell

The domino effect that led to the U.K.'s current pain started with a cold spell. After the chilly winter of 2020 to 2021 saw the U.K. and much of Europe draw down its energy reserves, the world began to emerge from the COVID-19 pandemic. Coming out of their slumber, Europe and Asia began to compete for the limited gas supplies of the U.S., Norway, and Russia—all of whom were refilling their own reserves.

Not surprisingly, gas prices rose, with prices on the spot market climbing by 400% since the start of the year, while electricity prices have jumped 250%.

As gas costs started to eat into profits, firms that couldn't afford this spike began shutting down.

In the fertilizer industry, two large U.K. factories owned by U.S. firm CF Industries Holdings have temporarily closed up shop, and Norwegian firm Yara has also cut production at a number of its European sites. That in turn has led to a shortage in carbon dioxide, a by-product from fertilizer production that is used to stun animals before slaughter, and a shortage of dry ice to cool foods in storage and transit. And that in turn has put the U.K. supermarket supplies of chicken and ham, fizzy drinks and ice cream in jeopardy. In just one example, online grocer Ocado Group stopped supplying frozen food to U.K. customers because of the dry ice shortage.

"[We] are on a knife-edge situation," said British Poultry Council chief executive Richard Griffiths.

Many in the energy industry are quick to say that this period of high prices will pass and things will soon return to normal. They avoid using apocalyptic terms like “energy crisis" and instead suggest that the price hikes reveal the flaws of the market-based U.K. energy system that has found itself heavily dependent on the same gas that it has been attempting to wean itself off of.

But there are plenty of reasons to believe that this energy crunch is not a one-time show.

“This phenomenon is happening around the world as we continue to increase the penetration of renewables, which is what we want. And we need to continue going down that path," said Anthony Catachanas, CEO of Victory Hill Capital Group, an asset manager that owns a portfolio of gas plants that are turned on at times of peak electricity use—known as peaker plants—for very high prices.

A “zigzag line”

The energy transition won’t be a smooth one but “a zigzag line," said Joost Bergsma, head of renewable energy fund manager Glennmont Partners.

"The direction will not change, there will always be more renewables on the system, but people have to be aware of the risks and the volatility issues of getting to that higher point,” he said.

In the past, the U.K. relied on its own North Sea gas reserves to provide energy at a moment's notice, with little of the need for gas storage that the rest of Europe has. But as its production slowed, the country ramped up its renewable output to maintain its energy independence. This boom in renewables—especially from offshore wind in the North Sea—has meant that the U.K. has made fast progress in cutting coal combustion, with a record-breaking two coal-free months recorded in the summer of 2021.

The problem is that as the U.K. mothballed coal plants, the country became more dependent on the international gas spot market as its sole flexible source of power generation to fill in when its normal sources fell short.

When gas prices were low and the wind was generating a solid 25% of the U.K.’s energy make up, which it did on average across 2020, no one seemed to notice this issue. But as soon as North Sea winds slowed as they did this summer—dropping production to only 7% of the country’s energy makeup—international gas prices soared. And security, affordability and emissions all suddenly became very important.

The surprise and shock shown by governments in the face of these price spikes is a bit disingenuous to the eye of some in the industry, who see instead a lack a planning by leaders who are happy to accept low prices when they're offered but unwilling to pay for the plans to mitigate the spikes that inevitably follow.

“Shocker. Volatile prices are volatile. They go up and down,” said the head of an energy financial advisory firm who asked to remain anonymous. He asked, if countries really wanted stable prices, "then why do you encourage the most volatile price determination?”

Taking into account the phase-out of coal (and nuclear power) in the U.K., volatile gas, however expensive, is simply still necessary.

"This is perfectly expected. This is the natural consequence to what the energy mix is,” said Catachanas of Victory Hill, the asset manager that owns gas peaker plants. "We have smiles on our faces at the moment," he noted, as gas-fired power generation is being brought in to balance the grid.

For Catachanas, the energy "crisis" is really a matter of "anticipation"—or the government's lack thereof.

Who pays?

Regardless of whether the market is working as intended or the spikes are predictable, the U.K. government is scrambling to figure out who will bear the brunt of the cost. Should consumers pay higher electricity bills as wholesale prices climb?

At least four energy companies, who joined the electricity distribution market in recent years have gone bust since the beginning of August, unable to keep up with the global spike in wholesale gas prices. (Fortune’s London-based correspondent's own renewable energy-focused electricity provider Bulb is also rumored to be going under.)

“I do have sympathy for consumer prices, but at the same time there has to be some balance. You can't force supplier companies [to eat] higher input costs," said Bergsma of Glennmont Partners. "The lesson is, it is a shared responsibility between the consumer, supplier, and the government.”

Unfortunately, this is most likely to impact poorer income households. According to Reuters data, in 2019 and 2020, the households in the lowest income decile spent almost three times as much on gas and electricity as a proportion of their total spending, compared to those in the highest decile.

And U.K. consumers are not the only ones facing energy price spikes. Spanish Prime Minister Pedro Sánchez has announced a temporary tax cut and a reduction in extraordinary profits made by energy companies to help consumers in the country. The Italian government has spent €1.2 billion to cut the increase in energy prices for households, with its Prime Minister Mario Draghi pledging another €3 billion to help consumers in the coming months. France has already announced a €100 subsidy for almost 6 million low-income households.

The need for flexibility

The U.K. is an extreme example. It has seen a rapid influx of renewables over the past decade while its energy system'a peak needs are still centered on the gas market. But this is a global issue, one with a lesson for countries around the globe as they begin the energy transition: one failure can collapse a system without sufficient backups.

“[This problem] is not entirely isolated to Europe,” says Bergsma of Glennmont Partners, pointing to a recent crisis in Texas where a severe winter storm battered inadequately insulated natural gas infrastructure and froze wind turbines. Texas has the largest renewable power generation of any U.S. state.

As the world moves away from nuclear energy and fossil fuels, there will be growing demand for flexible sources of power that are be able to respond to the peaks and troughs of intermittent renewable energy. And those will not always be clean.

“We’ve seen it in Australia very prominently,” said Catachanas. While renewables have a place in Australia, coal still provides 70% of its energy mix. This "comes as a result of renewable power generation not being able to be relied on sufficiently by the grid, so they turn to coal, which is more emmisive, more costly, and less efficient," Catachanas said.

For now, security of supply is still safe. "I don’t see a reason for blackouts, because there are more than enough sources of electricity supply. It’s just going to be expensive,” says Carlos Torres Diaz, head of gas and power markets at energy research firm Rystad Energy.

But as long as natural gas continues to stay the extremely volatile commodity it is, soaring gas prices and shortages will continue—and likely grow.