The UK Energy Market Crisis
21st September 2021
With the energy crisis hitting all news headlines this week, energy services provider, Professional Energy Purchasing gives an update on the situation for members.
The current UK energy emergency has been spiralling all year with several factors pushing gas prices up to unprecedented heights this month:
- Low renewable energy impacted by the weather - The UK now relies on almost a third of its energy being generated by wind, sun and rain as it moves away from fossil fuels such as coal. Poor weather conditions this year have increased the reliance on gas supplies.
- Gas reserves are low – Global gas storage is low following high demand during a long, cold winter in Europe and Asia, and a sharp increase in demand as global economies emerge from the pandemic.
- Gas supply is limited - Compounding the low reserves is the fall in production in the North Sea partly owing to the pandemic and a reduced supply from Russia who are sending less gas to Europe than expected.
This week analysts have also predicted that prices will increase further because of a fire at National Grid’s IFA interconnector.
This situation has caused several domestic energy suppliers to go bust and the UK’s largest energy suppliers to request a multibillion-pound emergency support package from the government similar to the Northern Rock bailout fund to pick up potentially unprofitable customers.
Linda Spencer, MD comments “We’ve been watching this crisis unfold since the beginning of the year, with September gas price trading hitting its highest in its 25-year history.
This has created a massive challenge for us in finding the best pricing options for clients who need to renew contracts soon. Many have opted for flexible market-driven solutions to spread the risk rather than tying themselves into long-term fixed contracts whilst the market is so high.
Whilst our customers won’t be affected by energy suppliers going bust, our main concern is that if something isn’t done to support businesses soon, many will not be able to withstand these costs and will be forced to reduce their operation or close completely. We are already starting to see this in the food industry which is threatening food supplies.”
How can businesses reduce energy costs?
This price hike will hit some businesses harder than others depending on how long it goes on for. And whilst there’s no magic wand to combat these escalating costs, there are a few things businesses can do to try to limit the impact.
Reducing energy consumption through simple housekeeping can make a big difference such as switching appliances, air conditioning, office equipment and lights off when not in use.
Longer-term it’s worth investing in an energy-efficiency audit to understand where some of the big cost savings can be gained through improvements to buildings, operations and machinery.
Jason Martin, Energy Manager at PEP provides this service to businesses to help them reduce their energy consumption and carbon emissions, with support given right up to onsite generation if required.
And despite the market being so high it‘s still important to have a good procurement strategy in place. This will ensure you don’t pay even higher inflated costs through variable rates and will be able to plan better for price fluctuations which are inevitable in such a volatile market.
Get in touch for help with purchasing your gas, electricity and water, or to discuss an energy audit for your business.