The Energy Market in unprecedented times

by Zen Family Member, Tim Golding

Contents

Introduction
Background
Sustainable Challenge
Summary
Author

Introduction

As has been widely documented and reported over the last six months, the energy sector is currently in unprecedented times with price hikes and in-day volatility as high as has ever been known. Add into the mix the need for the UK to transition to a more sustainable future and it is easy to see just why there is so much attention on the sector and the need for transformation.

Background 

Wholesale prices for both Gas and Electricity have been at unprecedented levels for a considerable amount of time now, with various factors contributing. It is having a negative financial impact on people’s personal and professional lives – or at least, if it hasn’t already, it is likely to in the very near future.

The energy sector has felt the full force of this crisis with 28 energy suppliers going into administration since August 2021. In my role, I talk to energy suppliers on a daily basis and it’s safe to say that the price hikes and additional non-commodity costs incurred across the UK’s network to help manage the demand during an uncertain period, along with the COVID-19 pandemic have impacted everyday life and working patterns. This unforeseen impact, and certainly the longevity of the increases, has been described as a one in thirty-year occurrence. One of the saddest aspects in all of this is that thousands of people have been made redundant following the collapse of these suppliers and, sadly, it may not be over yet, with the volatility and uncertainty forecasted to continue into the foreseeable future.

Gas and Electricity prices on 15-02-2022 – Click here to view current prices and analysis

Supplier certainty will therefore be a key part in any future procurement decisions. Ofgem has been quick to review its process for introducing new entrants into the market, ensuring the process is a lot more robust than before and to prevent a repeat of the current situation, which has significantly reduced the number of suppliers within the uk energy market. Anyone facing a contract renewal this year at home or professionally, will see significantly higher costs compared to the current contract, which will have a huge impact on personal expenditure or professional budget.

One thing to note is that, domestically, Ofgem has introduced a price cap which will limit the increases to a certain extent but, as has been well documented recently, this has been increased by 54% from 1 April 2022, and is set to be reviewed further ahead of additional increases in October 2022. There may be a disparity between the price rises seen domestically versus commercially as this price cap isn’t in place commercially and therefore the percentage increases could be significantly higher than what you are seeing personally. It’s useful to have this context as the two markets do operate very differently, with the domestic market more focused on protecting the consumer, particularly in the current climate.

It’s a well-worn phrase but it really is true: The cheapest unit of energy is the one you don’t use. If you are concerned, therefore, about the rising price of energy, the best way to reduce exposure to increased costs is to take decisive action to reduce energy consumption.

Sustainable challenge

Following COP26, it is very clear and evident that action is required now to keep global warming below 1.5°C this century, with the world needing to halve annual greenhouse gas emissions in the next eight years to do so.

Achieving this whilst we are paying more for energy presents its challenges as many of the sustainable solutions require significant investment at a time when budgets are strained more than ever. However, it is easy to argue that surely there is no time like the present to be more sustainable and self-sufficient as this will reduce your reliance on the network which would naturally reduce the financial impact in such a volatile market. Before this can be considered though it is worth noting that a plan is needed to provide direction and a clear strategy to achieve Net Zero by 2050 with this being different for each household and organisation. It’s impossible to go from 0-100 overnight but having a plan to implement certain changes each year will make Net Zero goals achievable and a tangible target which can feel impossible without a plan.

Summary

To summarise, we remain in uncertain times and I’ve no doubt that further challenges will face us all over the coming months. Here at Zenergi we are in a fortunate position to be able to provide end-to-end solutions covering all energy-related matters, including procurement, compliance, energy efficiency and Net Zero planning and implementation. As someone who has been in the industry for 14 years, the demands and landscape are forever changing with greater importance now rightly given to consumption reduction and Net Zero planning, with the relevant targets now clear across the world. Each and every one of us plays a part in the future of the planet and I genuinely believe that making smart and informed decisions now will create a brighter and more sustainable future for hundreds of years to come.

Author

Tim Golding is Zenergi’s Head of Strategic Partnerships, a role in which he represents Zenergi and its values to various business partners and suppliers. Tim has worked for Zenergi for 14 years, during which time he has built strong relationships and trust with all of our suppliers, driving the best performance from them in our mission to delight our customers.