What triggered the energy market crisis?
Wholesale energy markets in the UK have reached record levels in recent weeks. The problem stems from a global increase in demand for gas following a cold winter that depleted gas storage facilities, as well as a rebound in energy demand after the lockdown in Asia. A race to fill stores with gasoline before colder temperatures return has now caused market prices to soar.
The global gas grab is a major concern as half of the UK’s electricity is produced in gas-fired power plants. Demand for gas-fired electricity has also been above normal in recent months following a series of nuclear reactor shutdowns and the recent shutdown of a major electric cable that carries electricity from France.
The UK also had one of its least windy summers since 1961, which means wind power has been low. Experts fear the situation will worsen as temperatures drop.
What does this mean for my energy bills?
Market highs will result in some of the most expensive winter energy bills in the past 10 years, and push half a million more people into fuel poverty.
Energy regulator Ofgem said last month that default energy tariffs would increase by 12.5% on average to account for the rapid rise in energy market prices between February and July . The continued rise in energy markets since then means it is expected to increase energy bills again from April.
Even fixed rate energy offers are becoming more and more expensive. Many one- to two-year contracts are now billed above the default rates in anticipation of increased costs in the future.
Will my energy supplier go bankrupt?
If it is a small operator, then it is very possible. Energy experts at Barina Partners said there might be just 10 suppliers left by the end of winter, up from 70 at the start of the year.
Five suppliers have collapsed in the past five weeks, leaving more than half a million customers in need of a new energy supplier. The industry expects four more suppliers to go bankrupt before the end of the month, and brand more to follow throughout the winter.
The good news is that the regulator has a process to reassign customers left behind by a bankrupt company to a new supplier. Ofgem advised customers to wait until they find out who their new supplier will be before trying to switch to a new one – which usually only takes a few days. While you wait, take a meter reading so the next supplier can provide an accurate invoice.
Why are there concerns for UK heavy industry?
UK factories and steelmakers account for a significant portion of UK energy consumption and are highly exposed to market volatility. Steelmakers have already suspended work during peak hours of electricity demand, when prices have climbed to well over £ 1,750 / MWh or more than 2,900% above the average price of the past decade.
In addition, two fertilizer factories in the north of England have closed due to record gas prices. Another chemicals maker, Norwegian Yara International, plans to cut ammonia production by 40% at six factories across Europe, including its fertilizer plant in Hull.
What are the concerns of the UK food industry?
The government has held emergency talks with representatives of the food industry, as well as the UK meat industry, over concerns that problems in the chemicals industry could affect the supply of carbon dioxide to the food industry.
Fertilizer factories use gas to produce ammonium nitrate and provide CO2 as a by-product. Carbon is used in soft drinks and beer, for dry ice when shipping perishables, as well as in the meat industry to stun animals before slaughter.
The meat industry has warned that farmers may have to start ‘humane’ slaughter of pigs for the first time since the foot-and-mouth disease outbreak due to a looming carbon dioxide shortage in slaughterhouses that are already lacking of staff due to a labor shortage.
What can the government do to help?
Ministers face calls from heavy industry, food industry and energy suppliers to support the coming winter.
The government held talks with representatives of the agribusiness industry and business secretary Kwasi Kwarteng held crisis meetings over the weekend with representatives and energy suppliers and infrastructure operators. energy key to determine the severity of the situation in the months. before.
Kwarteng was scheduled to meet Ofgem on Sunday ahead of a roundtable of energy industry executives this week to discuss how the government can support the industry and protect households. No decision has yet been made.
In Spain, the government plans to put in place a one-off tax on power plant owners to create a € 3 billion (£ 2.55 billion) fund that will be used to reduce consumer bills.
Greece and France are also considering subsidizing energy bills. The UK government should also rely on energy price caps to protect households.