Increased gas and power price volatility is on the way as a number of unexpected factors come together to create the perfect storm.
That’s the verdict from Utility Team, which says oil has long been the main driver for gas and electricity prices – the production of crude oil and natural gas go hand-in-hand and as a result, future prices could historically be predicted with some degree of reliability.
However, the number of drivers for the supply and demand (and thus the cost) of energy are now diversifying, with many factors increasingly able to significantly influence the market.
One such contributor is the closure of the Groningen natural gas field, the largest field in Europe and the UK’s third biggest source of imports.
It is scheduled to halve production in next three or four years and fully shut down by 2030 – Julie Plunkett from Utility Team says this will really push up demand, especially considering the closure of the Rough storage facility last year, which was also heavily relied upon by the UK.
She adds another factor is the government’s massive overestimation of the cost of Hinkley Point C, which led it to agree to an expensive strike price of £92/MWh.
This will cause wholesale power prices to rise across the board, to the degree they could potentially double from the current average of £50 level once built for the next 35 years.
The third big influence is OPEC’s continued sanctions on oil exploration – less drilling means less natural gas supply so more demand and higher prices.
However, all is not lost – Utility Team says it can mitigate costs for consumers by securing gas and electricity rates now and helping to guarantee their future.
Julie Plunkett said: “Come to us now so we can go to market and get you a budget rate which will secure and protect against these increases over the next three to five years – prices won’t be coming back down so lock in now to avoid volatility.”
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