What’s happening with the energy market and what can you do if you’re due to renew?

27 Sep 2021

Business

Over the last few weeks news reports have been filled with worrying headlines about an energy crisis in the UK, and whilst politicians have been quick to issue assurances, there is no disputing the increases that both business and domestic consumers are seeing on their energy prices.

If you are coming to the end of your currently gas or electricity contracts, you are likely to see significant increases in your quotes. Comment explains what factors are causing the price hikes and what you can do if you are due to renew.

China

China’s demand for energy is always a key driver of global market prices. As their economy begins to bounce back from the pandemic, so does their demand for energy. Thanks to a long, cold winter in 2020-21 its gas storage levels are depleted. To satisfy its growing demand China is expected to import approximately a fifth more gas via super-chilled tankers from countries such as Qatar, meaning fewer shipments travelling to Europe.

Russia

Russia’s state-backed gas company, Gazprom, has refused to increase its exports to Europe, despite record-high prices across the continent, causing a further 10% increase in gas prices across Europe.

There have been calls for the European Commission to investigate whether this decision was a political move designed to raise prices and put pressure on regulators to approve its plans to build the Nord Stream 2 pipeline, a major gas line which has faced US sanctions but would double its capacity to send gas to Germany via the Baltic Sea.

UK electricity system

Around half of the UK’s electricity is usually generated by burning fossil fuels in gas-fired power plants, however this has had to increase further in recent months, seeing the national grid paying exorbitant prices to keep the lights on after a string of problems hit the power system, including:

  • Ageing nuclear power plants being forced to shut down operations for unplanned maintenance works
  • The main power cable used to import electricity from the continent has shut down due to a major fire at the Kent
  • The UK’s wind turbines all but stopping turning following some of the stillest months recorded since 1961.

Impact on Industry

Large steelmakers, chemical factories and manufacturers are all vulnerable to the impact of energy costs and are already feeling the financial pain of the energy price shock.

Steelmakers are already halting work during the hours of peak power demand to avoid record high prices and a number of fertiliser companies have either closed for the winter or significantly reduced production.

This has knock-on effects for farming, meat production and the food and drinks industry, which all rely on carbon dioxide, the main by-product from fertiliser production.

The government is now facing rising calls to tackle the problem of unaffordable energy before it erodes the UK’s post-Covid economic recovery.

Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “The energy price crisis risks aggravating the already severe supply chain predicament and could force some firms into a more permanent reduction in their operating capacity, by limiting their ability to fulfil orders and meet customer demand.

“The government must do all it can to safeguard security of supply and ensure that customers and suppliers have access to the support they need to weather this difficult period.

“Longer-term, Government should work with industry to explore how to increase the resilience of our most strategically important supply chains for key resources.”

Shopping for Energy?

There is no doubt that it’s a bad time to be shopping for a new energy supplier, but our partners at Energisave are committed to continuing to find the best prices on the market for Chamber Members.

Emma Clough, Director of Client Engagement at Energisave, explains: “Whilst we may not be able to make customers the savings we usually can right now, we are committed to helping businesses find the best prices available on the market and providing open and honest advice.

“We are dedicated to remaining transparent with our clients. We are also continuously monitoring prices across the energy market so will know the moment prices fall and be ready to act on behalf of customers.

“We fully appreciate what a difficult time this is for businesses and the added financial pressures rising energy costs add, so are happy to talk to any Chamber Members who may want to call us for some advice.”

To speak to an adviser at energisave please contact the Membership team on 01744 742125 or email membership@sthelenschamber.com and we will arrange for someone to call you.