Wholesale Energy Prices Increase Through Winter

According to the latest data released by EnAppSys, wholesale energy prices began the third quarter of 2021 at £31.37/MWh but as the weeks have passed those prices have continued to climb higher.

September saw wholesale energy prices surpass the previous record high level of £50.00/MWh before ending the quarter at the eye wateringly high value of £72.01/MWh.

The Day-ahead wholesale energy prices are even worse with prices averaging around the £126.14/MWh level, a surge of 69% from the previous record of £74.85/MWh set in the second quarter.

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

Global Gas shortage to continue

The wholesale price of gas is unlikely to fall as long as the global gas shortage continues and unfortunately there is little sign that it will end anytime soon.

Blaming the wholesale price of gas surge on factors such as Russia is deflecting the blame that can also be put onto western governments for failing to ensure their respective stored gas reserves were at adequate levels before the crisis began.

For example, Europe’s total stored gas reserves were 25% lower than the same period as last year after governments failed to replace the gas used during 2020s particularly hard winter. This resulted in gas reserves being at their lowest level since the start of EnAppSys’s data set in 2015.

The UK too is guilty of failing to ensure it had enough gas reserves with some in the industry blaming the government for penny-pinching. As a result, the UK has been relying on imports from the continent but a fire at an interconnector only added to the wholesale price of gas increases.

The UK’s stores hold just enough gas to meet the demand of four to five hard winter days or just 1% of Europe’s total available storage. The Netherlands in comparison has a capacity more than nine times the UK’s, while Germany’s is 16 times the size.

It's not just Europe struggling with the soaring wholesale price of gas, the USA has seen natural gas prices soar by 10% in recent days after the nation's weather service issued a forecast for cold weather in November.

Other factors contributing to the high gas prices include high carbon allowance prices as more coal has been used due to tight gas supplies.

Also read: Wholesale gas prices hit another record high adding to energy market concerns

More to come

Another energy supplier looks set to leave the market after Elexon booted London based business power retailer MA Energy out of the Balancing and Settlement Code.

This means that the supplier cannot take on any new customers or register any new metering systems. Elexon took action after MA Energy failed to adequately reduce its credit cover percentage.

So far the companies that Elexon has taken such action against have all exited the market shortly afterwards.

Further Reading

A third of small businesses could make staff work from home to reduce spiralling energy bills

Energy Price Forecast 2022: A ravaged energy retail sector, soaring wholesale gas prices, Covid-19 and much more

Government offers £5000 for heat pump adoption despite warnings from the Global Warming Policy Forum over water pollution and public health

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