What’s the latest on energy prices?
Our last update in September provided some welcome news that energy prices, whilst still relatively high, are reducing from the levels seen in the energy crisis.
Since then however, we have started to see volatility returning to wholesale energy markets. This has been driven largely by recent events in the Middle East.
As we have described in earlier blogs, global factors, and in particular geopolitical conflicts, continue to have a direct influence on the price of wholesale electricity and gas, including renewable electricity – which impacts the price we pay on our energy bills here in the UK.
After the conflict in the Middle East escalated following the terrible events on 7th October, wholesale gas prices began to rise, driven in large part from the shutdown of the Tamar gas field. This site is located near Gaza and meets almost 70% of Israel’s power generation.
Wholesale energy markets continued to experience volatility throughout October, with fears that the conflict could spread throughout the Middle East. With the region supplying a third of global oil and 18% of the world’s gas as of 2021, it has a significant role in global energy markets.
At the same time, events in Europe have also contributed to recent increasing prices. The Baltic interconnector – which is a key natural gas pipeline between Finland and Estonia, was shut down after possible reports of sabotage in early October.
The Finnish authorities saw a sudden drop in pressure, with damage to cables and pipelines also reported. It has later been revealed that the probable cause came from a ship dragging its anchor along the seabed.
However, the impact on wholesale gas prices has already been felt and exacerbated when combined with other global factors. A competitive Liquefied Natural Gas (LNG) market, where Europe is competing with Asia, combined with the geopolitical events described above resulted in gas prices reaching 4-month highs in early October.
The energy crisis has, and continues to, reinforce the urgent need for the UK to end our dependency on volatile fossil fuels. The UK remains vulnerable to price increases caused by geopolitical events.
To reduce bills, cut emissions and crucially insulate the country from volatile global energy prices, we need to accelerate the expansion of our domestic renewable energy infrastructure.
Update on bill support post April 2024
The Government’s Energy Price Guarantee (EPG) Scheme will finish on 31st March 2024.
Since 1st July 2023, only customers with a pre-payment meter have been eligible for an EPG discount, which from 1st October changed from a unit rate to a standing charge discount.
This followed a decision from the government to align the costs for comparable pre-payment and direct debit customers – having the effect of ‘levelising’ standing charges.
The regulator, Ofgem, are currently finalising proposals to deliver equivalent support for pre-payment meter customers from 1st April 2024 on an enduring basis.
If the proposals do go ahead, Good Energy prepayment customers will see the changes applied automatically. We expect Ofgem to confirm this in early 2024.
