This year has been a tough year for businesses with energy bills. We have seen some of the highest energy prices in 2022.
Now that we are coming into the colder months, we can imagine that a lot of businesses don’t want to be going through the same struggles when it comes to energy prices for next year.
The best way to ensure that your gas and electricity prices are not affecting your business too much is to keep on top of your energy contracts and get the best price as early as you can.
Read below how the energy market and trends are going to affect business energy prices or the next couple of months and going into next year.
What does the current gas market look like for Winter?
Gas prices recently fell
Gas prices have fallen recently. However, for this quarter of 2022, they are still notably higher than the previous two years.
There have been a few factors that have contributed to gas prices recently dropping. One factor has been mild weather, going into October the weather was unseasonably warm. Therefore, due to this, there was a lower demand than usual for gas.
Another reason for lower gas prices has been Europe being in a good position for winter. Despite the lack of Russian exports, most countries across the EU have managed to fill storage facilities to their capacity.
Gas prices rising and likely going to stick throughout 2023
Although we have seen some low points in pricing for gas contracts this does not mean that gas prices are going to continue to fall.
There has been a recent global demand for LNG with many major markets such as the EU and UK procuring significant volumes.
With the lack of Russian gas, Europe has seen a demand for LNG. Higher demand throughout winter is going to see Europe’s supplies possibly drained.
If the weather drops and the EU have a colder winter this would drive up demand further. Prices globally have already seen some changes as we have gone from the warmer summer months into the winter months.
Demand is forecasted to be much higher for this winter and going into next year, compared to the demand of the last five years. However, higher prices could reduce demand due to households and businesses trying to reduce their consumption.
The wholesale gas price trends currently suggest prices will remain significantly high into the coming winter period and next year.
Although the forward pricing of contracts remains volatile and is heavily dependent on developments in the global gas market and upcoming weather conditions.
In the UK, the Supply uncertainty going into next year is the primary driver of higher prices. UK storage is improving despite us not having the biggest storage infrastructure. Centrica Rough storage center will increase UK’s capacity by 50%. However, this still could be better.
The UK electricity market
Similar to gas prices, the electricity price entering winter at higher compared to the previous two years.
Volatility in the electricity market has stemmed from the gas market. Gas prices are continuing to be the main driver of the electricity market as gas and electricity prices are still tied to one another.
There has been contingency plans put in place for power over the winter and into next year – for example, the ESO has agreed on contracts with DRAX, EDF and Uniped to extend the life of coal fired power stations to secure electricity for next year.
Electricity prices for the winter are more uncertain and are likely to be more expensive from a consumer point of view.
Business energy contracts
With the price outlook for gas and electricity looking worse for next year it could be best for your business to get your energy contracts out of the way before prices become a lot higher.
With business support also being available this year it would also be best for your businesses to be on a fixed rate contract.
The government support states that if you are on a fixed rate contract then the wholesale element of your bill will be capped at 21.1 p/kWh for electricity and 7.5 p/kWh for gas. This means that your business will be less affected by the effects of the wholesale energy market.
However, if your business is currently on a deemed or variable rate tariff then you will only receive a maximum discount on the wholesale element of your business energy bills. The maximum discount will be up to 34.5p/kWh for electricity and 9.1p/kWh for gas. The discount will be the difference between a deemed wholesale rate and the maximum discount. This means when global wholesale prices go up, if you are on deemed rates you are going to be paying a lot more for your gas and electricity than those on fixed contracts.
If you would like to ensure you are paying the best prices possible for your next energy contract, then get in touch today to see what we could do for you.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.