Reasons behind the United Kingdom Recent Energy Prices

1. Reasons behind the United Kingdom Recent Energy Prices Energy prices are on the increase, and they are unlikely to return down anytime soon. This text explains why energy prices are increasing, and what your business can do about it. 82% increase in wholesale electricity prices I recently compared the daily power reports from 26/01/2018 and 21/08/2019. Early 2016 saw the industry's lowest wholesale electricity prices in a few years. Since then, there has been an 82% increase in wholesale electricity costs (from a flat average price of three.3p/kWh to six.06p/kWh). Although this is often a rudimentary example (the calculations behind it are complex), the trend is obvious - the value of wholesale electricity is increasing steadily. However, electricity prices are only one item on your energy bill, making up about 40-50% of your total invoice.  Alongside increased wholesale energy prices, we've also seen substantial increases in non-electricity costs - for instance, the govt continues to take a position in renewable generation to satisfy carbon reduction targets; these are ultimately purchased by the customer.

2. The key factors for increases in wholesale electricity costs are Gas prices Gas prices are indexed to Brent petroleum prices. In January 2016, the value of oil was $30 bbl; it's now trading at slightly below $73 bbl. Moreover, the value of gas feeds directly into the value of electricity for gas-fired generation plants (which generate 35%-45% of the UK's electricity). Gas Storage The closure of the United Kingdom’s main gas storage facility to compare utilities and mid-2017 has left the UK more reliant on gas imports from liquefied gas (LNG) ships and imports from Europe. Previously, the United Kingdom won’t to inject gas into the (now closed) storage facility in summer for us to withdraw in winter, thus reducing our exposure to international demand.

3. With the pound comparatively weak against the Euro, there's a greater incentive for Europe to compare gas and electricity and import energy from the United Kingdom, putting pressure on the supply/demand curve and increasing UK prices. Naturally, the value for us to import energy from the continent has also increased as results of the currency's tightening. Recent weather The 'Beast from the East' sent shockwaves throughout UK energy markets because the UK faced gas shortages and price spikes within the first week of March this year. Later within the year, the United Kingdom and Europe were hit by a heat wave. This meant that gas which might usually be injected into European storage for winter has been burnt for electricity generation during summer to manage temperature load (air conditioning), reducing storage for winter months and increasing prices as a result.

4. EU Emissions Trading Scheme The European Union Emissions Trading Scheme may be a key pillar of European climate policy. Electricity generators purchase permits (credits) for the quantity of carbon they produce, having a big impact on fuel generators and driving up their cost to serve. The carbon price has increased from slightly below E6/tonne a year ago to a market high of E21.8/tonne on the 27th of August. Ultimately, this is often all priced into the wholesale cost of electricity. The time is now to modify and save quite ever, energy consumers are motivated to seek out the most cost effective energy deals to mitigate the consequences of accelerating energy tariffs. An energy broker can quickly compare the energy prices from multiple suppliers to seek out a contract that most accurately fits your business' needs and budget.

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