Both 2021 and 2022 saw an increase in energy prices. 2021’s price increase was caused by a global surge in demand as the world exited the economic recession caused by COVID, with uncertainty continuing throughout 2022 due to Russia’s invasion of Ukraine and the subsequent cessation of gas supplies to Europe.
Having avoided a disastrous winter due to a combination of improved storage, new liquid natural gas (LNG) terminals, increased imports, lower demand, and better-than-average weather, April’s downward trending gas prices were abruptly interrupted in June due to the unexpected extension of planned maintenance outages on Norwegian gas fields and Netherland’s announcement that their Groningen gas field were to close a year earlier than expected.
Currently, hot weather is increasing the demand for energy needed for cooling across Europe. There is also some concern for the winter as gas storage levels across Europe need to be at 90% by 1 November 2023. With 30% of the supply historically provided by Russia, an early or prolonged cold snap could deplete storage levels quickly, leaving us vulnerable. LNG has been crucial in filling the supply gap but increased demand from Asia may inflate prices, whilst creating a shortage.
Due to more renewable energy being brought to the UK grid, National Grid’s costs to balance the electricity system have grown significantly, which inevitably will affect bills over the next two years. In addition, the government may seek to recoup costs of its energy price guarantee scheme by implementing a new tax linked to renewable energy investment, potentially increasing bills further from 2024.
Source: Utility Aid Ltd