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A third of remaining energy suppliers are at risk as wholesale energy prices hit second-highest level in three years

Richard Simmonds • Nov 16, 2021

The situation in the energy retail market grows grimmer as new analysis of the market shows that a third of the remaining suppliers is at imminent risk of going bust. Further adding to the crisis was a sharp spike in wholesale energy prices caused by a dire day for wind power and as tensions mount between the EU and Belarus.

Surging wholesale prices

On Monday, wholesale energy prices surged to their second-highest level in three years as low wind speeds pushed prices skyward for the peak period between 5 pm and 6 pm. The cost rocketed to £2000 per megawatt-hour, only the second time it has done so since 2018.


The incident raises further questions over the reliability of wind power and the government’s claims that more green energy will lead to cheaper energy. As a consequence of so little wind (just 4% contribution to the energy mix), the power grid had to turn to gas-fired and coal power stations to keep the nation’s lights on.


The surge in prices will have put even more pressure on energy suppliers struggling to survive.


“The very high wholesale prices have caused significant distress even before winter begins. How suppliers fare is in the hands of wholesale trading parties and how suppliers can manage their costs through the winter months ahead,” said an analyst at Cornwall Insight.


Also read: What has caused the Energy Market Crisis and what does it mean for the energy retail market?

A third of suppliers on the brink of collapse

New data released by accountant firm Price Bailey has revealed the terrible situation the energy retail market now finds itself in.

 

Of the twenty-nine companies checked, it found that 19 had above-average credit risk scores, and fourteen are deemed as being at maximum risk. Those companies will find it incredibly difficult to find or access new funding.

 

“The energy supply sector is facing complete carnage as we head into the winter months. Over a third of suppliers have already gone bust and another third are at imminent risk of going under in the coming months,” said a partner at Price Bailey.

 

This news must surely act as a wake-up call to Ofgem. If things don’t improve and more support is not offered to those suppliers still clinging onto life then soon they won’t have much of an energy retail market to regulate.


Also read: Energy Suppliers blame Ofgem for the crisis in the energy market

Gas prices are set to remain high as tensions grow

It’s not just the uselessness of wind turbines that have been putting increased upward pressure on energy prices but mounting tensions between the UK, EU and Belarus.


Belarus has been accused of deliberately funnelling thousands of migrants towards the borders of Poland, Lithuania, and Latvia in an attempt to force the EU to not impose new sanctions upon the country.


Troops from both sides have amassed on the Polish border and fears are growing of a possible armed escalation to the situation.


Belarus’s authoritarian president Alexander Lukashenko has threatened to cut off gas supplies to the EU in retaliation for sanctions. His threats may just be bluster but they’ve been enough to impact the wholesale gas market.


These concerns might be eased somewhat after it was revealed that Russian President Vladimir Putin on Saturday expressed disapproval of a threat by Belarus’ leader to cut off Russian gas supplies to the EU.


Also read: Energy Rationing Fears grow due to low UK gas reserves and Russian opportunism


Looking to enter the UK energy market? Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence. 


Whether you’re looking for electricity and gas systems or support on 
starting an energy supply company, Dyball Associates can help

Further Reading


Five energy suppliers warned they could lose their licences for failing to pay renewable obligations


Large Energy Suppliers see the best month for energy switching in eight years as consumers seek stability


The Department for Work and Pensions slammed for ‘damaging’ tariff switching message


Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

 

Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers get set up and start supplying.

 

For more information on how to start and manage an energy company, get in touch with Dyball Associates today. 

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