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London — Industry insiders warn that the UK energy industry could face serious turmoil and countries across Europe are tackling an unprecedented crisis in the electricity sector.
Wholesale gas prices are skyrocketing across the region, with the UK being particularly hit.
Last month’s gas prices at the Dutch TTF hub, the European benchmark for natural gas trading, rose Monday, trading at € 73.150 per megawatt hour ($ 85.69), approaching a record high. I saw last week..
Since January, contracts have increased by more than 250%.
In the UK, energy prices on the previous day on Monday averaged € 291.18 per megawatt hour. Energy analysis company LCP Inc.. However, the UK’s highest price on Monday could be as high as € 1,083.78 per megawatt hour, LCP Inc’s analysis shows.
Robert Buckley, Head of Relationships and Development at Cornwall Insight, told CNBC that the crisis was caused by a “pretty strong cocktail” out of the control of the supplier.
These included fierce competition for natural gas supplies between Europe and Asia, some outages at US production facilities, stricter EU carbon market regulations, and a variety of other factors.
“At this point, all suppliers will find it very demanding,” Buckley said. “Some of them are bigger and more elastic than others, but the scale is automatically not equal to the elasticity.”
“It looks like it’s going to get worse before it gets better,” he added, when it comes to suppliers leaving the UK electricity and gas market.
“”[Suppliers are] Sandwiched between this delight in the rising energy price wholesale market and the default tariff cap, for those you believe, this is up to £ 200, as it is £ 250 lower than current market-related costs. “It mentions the UK consumer energy price cap, which is 20% of total billing,” he said. “This is -20% of total margin. Very small. [companies] You can keep it for any length of time. “
Meanwhile, Bill Bullen, founder of UK supplier Utilita Energy, warned that soaring wholesale prices would inevitably lead to bankruptcy in the energy sector.
“We are returning to oligopoly at this rate and retreating,” he said in an email Monday.
according to report In the fourth quarter of 2010, six major energy companies supplied 99.5% of the UK’s domestic energy market, according to Cornwall Insight. By the second quarter of 2021, that number had dropped to 69.1%.
“What will happen at the end of the third quarter of 2021?” Bren said.
The country’s sixth-largest supplier, Start-up Bulb, is seeking relief, and four smaller competitors, the BBC, have recently shut down. report..
According to industry group OGUK, wholesale energy prices soared by 70% in August alone. “OGUK predicts that UK production in the North Sea will be cut in half by 2027 unless new areas are opened, and Britain will become more dependent on imports,” said the organization’s energy policy manager. One Will Webster told CNBC in an email.
A spokesman for Ofgem, a UK energy regulator, told CNBC by email. “This is a global issue … Ofgem is working closely with the government to manage the broader impact of rising global gas prices.”
The government is keen to take action to stop the crisis that will hurt consumers.
According to local media reports, the British government is considering a bailout loan to an energy supplier. Business Minister Kwasi Kwaten said in a meeting with a British energy company on Monday that it was an effort to “ensure that the failure of energy suppliers would minimize the disruption to consumers.”
Prime Minister Boris Johnson seeks to reassure the public on Sunday Described the price crisis as “temporary” Bloomberg reported.
In the UK, suppliers have limits on how much energy they can charge consumers, and price caps are reviewed by the government every six months.
In a memo on Monday, the Eurasia Group warned that rising energy prices on the continent are also beginning to have political impact across the wider region.
This week, the Spanish government announced a decree limiting retail energy prices. Eurasian analysts speculated that more EU member states imitating Spain and prioritizing cheaper energy over green transitions could undermine the EU’s credibility as a leader in climate change. ..
“If Madrid’s actions find imitators across the EU this winter, Block’s efforts to promote more ambitious climate action at the World Congress scheduled for November may suffer,” they said. Said in a memo on Monday.
British energy companies are afraid of collapse as European gas prices skyrocket by 250%.
Source link British energy companies are afraid of collapse as European gas prices skyrocket by 250%.