| | NOVEMBER 20258IN MY OPINIONOPTIONS AVAILABLE FOR RISING ENERGY COSTSBy Latif Faiyaz, Head of Energy Trading & Strategy, Northern Gas and PowerOnly as far back as two years ago energy prices were relatively stable, depending on your budget, energy was not a major concern. Traditionally many businesses looked at it in August and signed for a 1 or 3 year deal. Back then wholesale prices for electricity were between 4-6p/kWh. A bad day seeing 7p/kWh for a few days. Recently as last summer prices reached over 100p/kWh for wholesale electricity costs. How did this happen?Energy prices did not just rise on the Russia/Ukraine crisis but we're raising throughout 2021 due to structural issues in the UK, European and global energy markets. Lack of Storage has been a key driver, the loss of Rough storage in 2018 saw prices rise and has left the UK with more vulnerability to supply shortages compared to European nations. For the first time, Chinese demand for energy took away gas supply from Europe. Brazil's drought also took away supply with their hydroelectric plants not able to be utilised. Additionally, the backlog of maintenance from 2020 reduced supplies further in 2021 causing strains on the system. This weakness in the European energy market was seen by Russia and a prelude to the Ukrainian invasion. Since the invasion prices have risen over five-fold. Last August prices reached a peak of 100p/kWh for electricity when Russian supplies to Germany ceased. A fire at a US export facility and the European heatwave causing draughts to have exacerbated structural issues for energy suppliers. What options do I have for my energy contracts?With this new level of volatility, which is now here to stay for the foreseeable future, consumers now have to adapt their energy purchasing strategy. No longer are fixed Latif Faiyaz
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