The energy market gets more like a scene from a Bond movie every day.
Russia which is historically the EU’s biggest gas supplier with about 40% of demand, has once again cut its supply.
The latest move from state-owned Gazprom PJSC has halved supply to 20%, blaming technical issues with the Nord Stream 1 pipeline. This caused gas and electricity prices to escalate and has put huge pressure on EU countries who are trying to replenish gas stores before winter.
And although this affects a lot of Europe, Germany is the most exposed as the region’s biggest economy, where nearly half of the homes rely on its fuel for heating. Industrial firms in Germany are considering reducing production or giving up certain operations because of the energy crisis, whilst energy-intensive industries will likely move to regions with renewable power resources to survive.
Thankfully planned strikes in Norway were halted by the Norwegian government to help combat the severe demand for gas flows.
In the UK, Centrica has been granted a license to reopen its giant Rough gas storage facility. It’s expected to need an investment of £2 billion to open the site which previously provided 70% of Britain’s gas storage capacity. The site would build up capacity gradually and could eventually be used to store hydrogen. This would help to guard the UK from unexpected supply issues and price hikes.
The government has also launched the British Energy Security Strategy (BESS) which will transform the UK energy market and drive investment in low carbon technologies such as offshore wind, solar and nuclear. This will support the UK’s target of achieving Net Zero and ensure a secure electricity system by 2035.
Electricity and Gas Prices
Winter 2022 prices have increased substantially since last month, mainly caused by supply concerns across the globe.
Unfortunately, the long-term picture doesn’t look any better with more rises anticipated.
Our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over eg a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.
The EPEX price currently for August is 24.63 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 34 p/kWh+.
At the beginning of July, carbon prices traded at €89 per tonne but dropped over the course of the month to €79 per tonne. This is partly due to companies selling off their carbon credits because of the volatile markets we are experiencing.
Brent crude has been bearish this month, decreasing by 9% since the 1st of July with news of inflation and recession keeping oil prices at bay.
Weak Chinese manufacturing data highlighting lower demand and manufacturing output is also affecting the market.
For help and advice with your business energy contact our team.
0114 327 2645