Electricity Market Report

Shocking electricity price increases.

The world has changed since November 2018, that’s for sure and Electricity Markets are no exception. In late 2018, we were well aware of what was to come from an industry point of view, rising Third Party Costs were expected; there were other factors that hadn’t been resolved yet, Brexit, Oil Markets, Geopolitical tensions/changes and possibly the rise in Renewables. Before we delve into some of these facets, lets compare the com-modity itself:

On average, the Commodity is around £13/mWh or roughly 1.3p/kWh higher now than it was in late 2018. There are various reasons we can point to; an enormous increase on Carbon Markets as governments announce ambitious Carbon Reduction Plans as a result Carbon Markets have risen by over €30/t since 2018. The UK Gas System is currently engulfed in a storage crisis ahead of Winter 21, where offers have increased to over 82p/Therm (a rise of 42p/therm since last year) which has fed through into Electricity Markets. Oil Markets have also increased considerably, with Brent Crude posting a $31.73/bl increase in the past year alone.

There are other factors to consider, notably, Supplier Risk; this is the element of a Final Unit Rate that we cannot see; and due to the pandemic we have seen Suppliers take a much more guarded view and as a result Supplier Risk (and Margin) may have just swelled a few percentage points also. Another element is Targeted Charging Review (TCR) – an Ofgem led change on how industry costs are recovered. This element will significantly change the Standing Charge element of a HH Customers Electricity Bill as the introduction to a Fixed Day Residual Charge takes over. In some instances we could see Standing Charges increase by over 25%.

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