UK Electricity Rates Now Highest In Europe

UK day-ahead power prices tripled to record levels on Sept. 13 as tight generation margins coupled with soaring gas and carbon prices and high-level import instability have led to the UK now paying the most for energy amongst its European counterparts. 

The UK was hit particularly hard due to its accelerated coal phase-out along with short nuclear capacity and low wind levels. This has increased the demand for gas-for-power generation. With gas storage levels being heavily affected by the closure of Rough storage facility (the last remaining large-scale storage facility), the UK has relied heavily on foreign imports. To add to this strain JKM LNG markets have had a very prosperous period meaning that the UK has struggled to compete with Asia for cargoes.

These factors, further consolidated by poor timing with pipeline maintenance works, have combined to push electricity and gas spot prices to unprecedented levels. As of Sept. 14, baseload prices sat at £540.15/MWh up from £171.15/MWh Sept. 10. With the prospect of the UK entering winter with low gas inventories, market analysts expect these levels of increase to be sustained in the months to come. 

This presents a huge risk for market participants, both consumers and suppliers. As of last week, 2 more energy suppliers (Utility Point and Peoples Energy) ceased trade. High energy-use sectors, such as manufacturing industries, are likely to see unexpected spikes in overhead costs that may make production uneconomical. This presents a troublesome future for many UK businesses, further exacerbating the challenges of economic recovery following COVID-19. 

Get in touch with one of our senior consultants to see how we can minimise business risk within electricity markets.