“Gas prices are expected to remain high and volatile for the foreseeable future. The forward wholesale gas curve suggests prices will remain significantly elevated into the coming winter period and seasons beyond,” said Sam Peek, senior analyst of assets and infrastructure at Cornwall insight.
Cornwall Insight has disclosed that near-term power prices will remain volatile, amid added renewables capacity in comparison to the previous winter, along with wider sentiment driven market volatility.
Revealed as part of the company’s Winter Outlook 2022 webinar Lee Drummee, Cornwall Insight analyst of assets and infrastructure, also indicated that volatility in power prices will remain in place for the foreseeable future.
“Drivers for power prices this winter remain mixed. While day-ahead prices could continue to ease, with a degree of rising market optimism, these trends are in their infancy, and there remains significant risk baked into longer date contracts for this winter season,” Drummee said.
The winter period could potentially be harsh, not only for the UK but also for the wider European continent. With geopolitical tensions crippling natural gas supplies, energy demand is expected to increase, and consumers are being exposed to high volatility in the market.
To mitigate this, the government introduced the Energy Prices Bill last month, which enshrined in law the Energy Price Guarantee and the Energy Bill Relief Scheme in the UK, from the beginning of October.
The Energy Price Guarantee is designed to limit the jump in domestic energy bills – which had been estimated to increase to as much as £6,500 – to £2,500 a year for a typical household by capping the electricity and gas units at 34.0p/kWh and 10.3p/kWh respectively, inclusive of VAT for standard variable tariffs.
The Energy Bill Relief Scheme halves the predicted MWh price for electricity and gas for businesses this winter, to £211/MWh and £75/MWh respectively.
Despite the positive implementation of policy to protect consumers and businesses as well as the scaling of the renewable generation sector, the future appears bleak.
This coincides with comments made by Drummee who stated: “Gas prices will continue to be the main price driver, with gas plants still being marginal and price setting in the wholesale market. High prices remain across forward contracts, through near-term price have started to observe a period of bearishness.”
This has been identified in research conducted by Cornwall Insight which said on Default Tariff Cap forecasts for April to June 2023 that the average consumer is predicted to pay £3,702 from April as opposed to the previously projected £4,255. Although this is a reduction and a step in the right direction, the figure is still hugely above the £2,500 Energy Price Guarantee levels.
In order to transition the UK away from fossil fuel usage and in turn reduce energy bills this winter, RenewablesUK has urged the UK’s new Prime Minister Rishi Sunak to support the scaling up of the clean power sector to boost energy security and cut energy bills.
Both energy security and reducing the price of energy bills will be pivotal issues for Sunak’s tenure as Prime Minister and Dan McGrail, CEO of RenewableUK, has called on him to support growth within the clean energy sector to help support these crucial determining factors.
“Cutting people’s energy bills and boosting energy security will be high on the new Prime Minister’s agenda, so we’re keen to work with Mr Sunak to achieve this as fast as possible,” McGrail said in a statement.