Since July of last year, the price of gas and electricity has risen drastically and there are no signs of this decreasing over the next coming years.
A simple explanation for gas costs doubling for some within the UK is the difference between the supply and the demand for gas and electricity. With less gas being available to the public and the winter months coming up. Prices will have to increase to keep up with demand.
Ofgem, the government’s energy industry regulator, implemented price caps for energy prices to ensure that the cost of supplying gas and electricity to households was at a fair price. However, this price cap is now increasing.
The energy price cap increased a staggering 54% in April, and it is estimated that the price cap will increase a further 70% in October of this year. This means that before the end of the year the energy price cap will equate to 274% of what it was in January. If this prediction is accurate then we may see the number of people in fuel poverty within the UK increase tremendously.
Why are the energy prices increasing?
The prices for wholesale energy for gas and electricity have reached an all-time high meaning that households are now having to inevitably pay for this increase in price. Here are the main reasons why this increase in wholesale energy is happening:
Gas storage levels are at an all-time low
As much as it may seem we’re alone with our fuel crisis, we’re not the only ones. Across the whole of Europe, countries are also struggling. The main reason for low storage levels is that most of the stored gas was used within the first half of 2021. This is also a huge indication that daily production may not be enough to meet the demands of the winter months.
Very cold temperatures in the UK due to winter months
The UK used lots of gas during the winter months of 2021 due to the cold temperatures that followed in this period. This trend further continued into the winter months at the end of 2021 into 2022. With winter around the corner, we could expect this trend to repeat itself on a larger scale.
The European pipeline deliveries continue to decrease
The UK used lots of gas during the winter months of 2021 due to the cold temperatures that followed in this period. This trend further continued into the winter months at the end of 2021 into 2022. With winter around the corner, we could expect this trend to repeat itself on a larger scale.
Low wind generation in Europe has increased the demand
Since last year, the energy produced from wind power has been reduced due to low-wind conditions in the UK. SSE, the energy company, reported a 32% decrease in wind-generated power in 2021, leading to them only generating 11% of their full-year target output. As a result of this outcome, gas reserves have been used to generate the required energy.
Gas supply from Russia has been limited
Over 45% of natural gas imported from non-EU countries is from Russia. Due to Russia’s hopes to open the newly completed Nort Stream 2 pipeline to Germany, they have withheld from aiding in the energy crisis by providing additional gas to Europe. This has been worsened due to the current situation between Russia and Ukraine with the UK placing sanctions on Russia due to their actions.
The global pandemic
Due to recent events with the coronavirus pandemic, a large proportion of the population was required to work from home if possible. Due to this, there was a natural increase in the amount of gas used where homes would not normally have been heated to this extent during the day.
Many energy suppliers are exiting the UK market
Many suppliers within the UK are collapsing and exiting the UK energy market. They are unable to maintain their price promises now that gas prices are increasing exponentially. This has resulted in customers having to switch to larger suppliers such as British Gas who are now raising their own prices to keep up with demand.
What can you do?
With gas prices set to increase by a further 70% this year in October, we’re all wondering what we can do to ensure that we can afford to pay our energy bills.
One thing householders should do now is to contact their energy supplier right away, as they may be eligible for support schemes, payment breaks, or even a repayment plan.
Householders can also save costs by increasing their energy efficiency within their homes. Products such as Radflek, endotherm and smart thermostats have been proven to save homeowners as much as 15% on their annual energy bills. Endotherm is a unique energy-saving additive for wet heating systems that is independently proven to save up to 15% on energy consumption and heating costs in addition to delivering significant carbon reduction. Radflek is an energy-saving radiator reflector that reflects 95% of the wasted heat energy radiated from the rear of a radiator back into the room. The TCP smart thermostat allows you to control the temperature in each room separately or schedule different routines to save you more energy. Furthermore, it is compatible with smart systems such as Alexa to maximise efficiency. All these energy-saving products are available online from our website.
What does all of this mean?
It is unlikely that gas costs will decrease in the short term. Due to coronavirus, the UK’s low gas storage levels, harsh winters, and limited gas supply from Europe, it seems that high prices are going to stay and will keep rising for the foreseeable future.
