Factors that increase gas and electricity in a business
Constant changes in wholesale energy prices can be extremely frustrating for business owners and consumers, especially with limited financial flexibility.
Knowing the factors that cause changes in the energy market that cause energy prices to spike will help you predict when it will happen and how to prepare for it.
There are always options
The following factors play a role in wholesale gas and electricity prices and rising energy costs.
Supply and demand
Supply and demand are fundamental relationships that determine electricity and gas prices.
When the price a producer wants to sell matches the amount of energy companies are willing to buy at that price, then a market price is established.
Certain factors – geopolitical events, natural disasters and even weather conditions – limit the supply of electricity, which leads to higher demand and prices.
When wholesale prices go up, energy providers raise their rates to cover the extra expenses, and we all face a higher energy bill.
Natural gas prices are at all time highs due to falling supply and rising demand.
- A prolonged cold winter in 2020 and 2021 drained natural gas storage, leading to gas shortages.
- Asia’s strong demand for liquefied natural gas (LNG) is leading to reduced shipments to Europe, thus decreasing gas supplies.
- It is almost impossible to store gas in the UK as it has some of the lowest gas reserves in Europe. This further increases the demand for natural gas.
- Due to a large proportion of UK electricity generated from gas-fired power stations, fluctuations in wholesale gas prices directly influence electricity prices.
How do world events affect energy prices for businesses?
Major events such as natural disasters or wars in oil and gas producing countries will cause gas and electricity supply shortages. This means higher demand and the end result will be increased energy bills for your business.
Keeping abreast of current world events will prepare you for price hikes and higher energy bills.
The carbon pricing system aims to reduce carbon emissions, reduce greenhouse gases and promote clean energy technologies.
Under the EU emissions trading scheme, a few heavy manufacturing industries are required to pay the cost of carbon emissions, including coal-fired generators, which then pass on the carbon costs to individuals, homeowners and businesses.
Companies must buy permits with emission quotas to operate. Permit prices are constantly rising and are expected to quadruple by 2030, which strongly affects coal and gas power plants (and your electricity bills, of course!).
Like other commodities, gas and electricity fluctuate in currencies.
The price of these commodities in the UK is highly dependent on the strength of the pound against the euro as much of the UK gas comes from Europe.
Generally, gas prices and electricity tariffs fall when the pound is strong against the euro. If the British pound weakens, the rate will rise.
Given the uncertain Brexit outlook, the British pound is experiencing an economic slowdown and energy prices are on the rise.
How can I reduce my company’s energy bills?
- You can implement energy saving measures in your company. There are countless ways to reduce your energy consumption at little or no cost. Read Utility Bidders guide on how to make your business more energy efficient.
- Stay up to date with current events, as they directly affect the price of your energy tariffs.
- Lower your utility bills with Utility Bidder’s comprehensive services to compare quotes and find the best gas and electricity prices for businesses. It will save you time and money!