Storage Gains & Price Rises
- Professional Energy People
- Aug 12
- 6 min read
UK Energy Market Update
July 2025
Market Summary
In July 2025, EU aggregated gas storage levels increased steadily from around 59% at the start of the month to approximately 69% by month end, although it remained about 8 percentage points below the five-year seasonal average. The European Parliament approved reforms to gas storage regulations during the month, extending the deadline to reach the 90% target from 1 November to 1 December and allowing limited deviations in stressed conditions, which eased near-term market pressure.
The UK government decided against implementing zonal electricity pricing, which would have split the country into regions with prices reflecting local supply and demand. Instead, the government announced plans to take greater control over the planning and location of clean energy projects to ensure a more balanced spread across the country. This approach aims to give investors clearer signals on where and when to build new infrastructure, speed up grid connections, and reduce costly constraint payments caused by grid limitations. While some in the power market welcomed the rejection of zonal pricing, there is cautious optimism about upcoming system reforms that could improve efficiency and support continued investment in Britain’s energy transition.
Rough, the UK’s largest gas storage facility, was closed in 2017 and reopened in 2022 to boost regional storage capacity. Centrica now plans to switch Rough from seasonal storage to gas production this winter to reduce losses of £50-100 million pounds per year. The facility, which represents about half of the UK’s gas storage, has mainly been in withdrawal mode this year with no plans to refill before winter. Centrica is seeking government support to continue storage and convert Rough for hydrogen use, but without backing, closure remains possible.
The recent trade deal between the US and the EU sets a 15 percent tariff on most European goods, halving a previously threatened 30 percent increase and easing tensions between the two regions. As part of the agreement, the EU has pledged to purchase up to $250 billion annually in US energy products such as oil, liquefied natural gas, and coal over the next three years. While this commitment aims to reduce Europe’s reliance on Russian gas, experts warn that the scale of energy purchases may be unrealistic given existing market dynamics and capacity limits. The deal has boosted US LNG exporters’ stocks, reflecting expectations of higher demand, but analysts expect only modest short-term impacts on gas prices. The agreement may strengthen transatlantic energy ties but also raises concerns about increased European dependence on US fossil fuels at a time when the EU is pushing for a green energy transition.
U.S. President Donald Trump has threatened tariffs of up to 100% on countries buying Russian oil and gas unless Moscow agrees to a peace deal with Ukraine, initially giving a 50-day deadline that was later cut to 12 days. The proposed secondary sanctions would hit major buyers such as China and India, potentially tightening global energy flows and pushing up prices. Analysts doubt full enforcement, warning it could remove millions of barrels per day from the market and risk a global economic shock. Markets have reacted cautiously, mindful of Trump’s past reluctance to follow through on similar threats.
Net Zero News
Ofgem has provisionally approved a £24 billion investment programme to upgrade Britain’s electricity and gas networks, with 80 major infrastructure projects due for completion by 2030. This represents the largest expansion of the power grid since the 1960s and is designed to strengthen domestic energy security, protect consumers from global gas price volatility, and speed up the shift to net zero.
The government has unveiled a plan to double England’s onshore wind capacity by 2030, targeting 27 to 29 GW and creating up to 45,000 skilled jobs. Backed by over 40 measures, the strategy aims to revitalise a sector that has made little headway in the past decade.
The energy market remains turbulent, with geopolitics, extreme weather, and policy uncertainty keeping volatility high — the key takeaway from an insightful ELCC panel.
The UK is struggling to keep pace in monitoring climate progress, with emissions data trailing real events by 18 months, warns climate charity Carbon Copy, which says the lag is undermining efforts to cut carbon at both local and national levels.
Labour says millions of workers will gain from cheaper clean energy as the government approves Sizewell C, the UK’s largest public clean energy investment this century. The Energy Secretary has signed off the final investment decision for the 3.2GW nuclear plant, set to power the equivalent of six million homes and create 10,000 jobs once operational.
New analysis of official production data shows the UK will not be able to meet its heating needs using only domestically extracted gas by 2027, even if new North Sea fields are approved. Heating homes currently makes up 38% of the country’s gas consumption. The data highlights a sharp decline in North Sea gas production.
UK business confidence in reaching net zero by 2050 is weakening despite clearer policies, according to the 2025 BSI Net Zero Barometer. Although 64% of businesses say they are still committed to the legally binding target, this is down from 83% in 2024, with just 25% describing themselves as “very committed.”
The world’s demand for electricity is soaring and shows no signs of slowing. According to the IEA’s latest Electricity Mid-Year Update, global power demand is expected to rise by 3.3% in 2025 and 3.7% in 2026, more than double the growth rate of overall energy demand.
Electricity & Gas Prices
UK wholesale gas and electricity prices rose through July 2025, supported by Norwegian supply outages, extended maintenance at the Troll field and sustained demand for gas-fired generation. Bullish sentiment was reinforced by geopolitical uncertainty and intermittent renewable output, which increased reliance on conventional generation. Downside pressure came from steady LNG arrivals, increasing European storage levels and subdued demand in parts of the UK due to mild weather. Nonetheless, prices remained sensitive to potential supply disruptions and shifting weather patterns as the market looked ahead to autumn.
Flexible Purchasing
EPEX Price
Some of 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 e.g. 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 finished the month with an average of 7.92 p/kWh (commodity). With the non-commodity added to this, the overall rate will be around 18.82 p/kWh+.
Carbon Prices
In July 2025, European Union Allowance (EUA) prices averaged around €70.64 per tonne, representing a 2.3% decline from June’s average. This modest pullback reflected cooling momentum after early month support from options expiry and broader energy market flows.
Prices remained range bound, influenced by technical factors such as options expiry, muted industrial output, and mixed policy signals from Brussels including emissions cap adjustments and the development of the carbon border mechanism. Looking ahead, tighter supply frameworks from 2026 onward through reduced free allocations, upcoming ETS reforms and the Carbon Border Adjustment Mechanism are expected to exert upward pressure on prices in the longer term. Short term volatility is likely to remain driven by market flows and macroeconomic developments.
Oil Market
4th - Oil futures declined after Iran reiterated its commitment to nuclear non-proliferation, while expectations grew that major producers would agree to increase output in the coming days.
9th - Oil prices slipped after hitting two-week highs in the previous session, pressured by investor caution over pending clarity on new U.S. tariffs and forecasts of growing crude inventories in the United States.
14th - Oil prices climbed to a three-week high as investors monitored the prospect of additional U.S. sanctions on Russia that could impact global supplies, with increased oil imports by China providing further support.
18th - Oil prices increased after the European Union approved new sanctions on Russia, supported further by supply worries stemming from drone strikes on northern Iraqi oilfields and an already tight market.
23rd - Oil prices held steady after three straight sessions of losses, as a U.S. trade agreement with Japan lifted global market sentiment. President Donald Trump announced Tuesday that the deal includes a 15% tariff on U.S. imports from Japan.
29th - Oil prices inched higher amid optimism that tensions in the U.S. trade disputes with major partners were easing, while President Donald Trump increased pressure on Russia over its war in Ukraine.
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