Why have UK energy prices increased?

Wholesale energy prices in the UK have risen substantially. This has been driven by a number of factors.

  • Fluctuations in temperature. We had several very cold spells - “Beast from the East”- prompting high use of heating in winter (which used a lot of energy) and then a very hot summer resulted in high use of air conditioning (again, using more energy).
  • Weak wind. Last year generation from renewable sources, such as solar and wind, was very strong. This year wind output as a source of generation has been relatively weak, though solar output has been stronger (but only during the day).

So we used more energy across the UK this year, but have not been able to generate as much from wind power. This put pressure on producing energy from gas. Gas fired power stations are one of the most flexible ways to generate electricity, and are preferred over coal stations which have mostly closed.

  • Higher demand for gas. As we moved through winter 2017 further price pressure was applied due to the emptying of European gas storage facilities and then the need to fill them again this summer.
  • Offshore outages. There have also been some problems with the supply of gas coming into the country. A lot of our gas comes from the North Sea or via pipelines from Europe and Norway. When one route hits problems, the other places take advantage and put up their prices.

Finally, Brexit continues to loom large on the horizon, and the uncertainty is currently contributing to wholesale energy prices. Sterling is weak against the Euro & Dollar, so as we import large amounts of energy we are forced to pay more for it.

The charts below show the price of energy in the UK over the past 4 years.