Why are UK energy prices increasing at such a rate?

Electricity and, to a lesser extent, gas prices have rocketed up over the past 6 – 8 months putting additional pressure on UK businesses. Price have increased in some cases by up to 30%.

Here are just some of the reasons for these unprecedented increases:

  • The “Beast from the East” at the start of the year has lead to a much greater demand on electricity and gas supplies. The poor weather also continued further into the year than expected. This in turn depleted reserves that have taken time to replenish putting greater demand on the energy generators.
  • The summer heat wave meant less generation from wind power (no wind!) and nuclear (water was not cold enough to cool the reactors). This meant the increased use of coal and gas power stations which attracts a carbon penalty making electricity production much more costly.
  • An unprecedented demand on gas from China, who are undertaking to switch from coal to gas fired power stations, has pushed gas prices up.
  • There are new supply charges that the suppliers are passing on to customers for the distribution and upkeep of the networks. This is in addition to Government enforced charges for things like Feed in Tariffs, renewable energy production, and counteracting fuel poverty.
  • Exchange rates play their part too with the pound being weak due to Brexit leading to increased costs in generation
  • Finally, Brexit (again) is stopping investment in lower cost generation (renewables and nuclear). No one will commit to these until they know it means. This will lead to a continued reliance on coal and gas with the carbon levy that is added to this form of generation making it the most expensive way to generate power. The levy will continue to increase year on year so future electricity prices are not looking pretty either.

 

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