Navigating your way through the energy labyrinth

Winter and summer electricity prices are on the rise

Written by: Neil Bailey
Date published: 05/03/21

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Summer wholesale prices are now priced at £53 with winter reaching £62/MWh both up 20% from 6 months ago

Brexit is mentioned as a cause of this due to the decoupling of the EPEX & Nordpool exchanges, a blip possibly and this may take over 12 months to resolve. The knock-on effect is that the Government’s pledge to fix energy prices will increase the lower limit of the fixed price tranche. Who would have guessed this? Well quite simply no-one else the forward market would have priced this in. Forward curve liquidity provides some indication of movement in energy markets but beyond this then it is purely a guessing game.

I apologise for starting this blog with bad news but this is intended to illustrate the continued uncertainty in the energy markets and the often-quoted rule of unintended consequences. Clients that I speak with now have to consider their decarbonisation targets/commitments as well as making decisions on energy procurement and future investment. There is a growing community of energy consumers that would prefer to be completely independent of the grid and become 100% self-sufficient – this is a trend that is set to continue and aligns with de-carbonisation objectives. Our human instinct to be self-sufficient is appealing however when you translate this to a corporate environment the risk adverse nature of business tends to prevent any creative thinking around this. Why would you not consider generating all your energy needs from renewable sources and even becoming a net importer to neighbouring businesses – it is the talk of the energy intellectuals using so called smart networks, energy storage and trading via blockchain technology to enable this. No longer a vison but now a reality and many trials in place around the world developing this.

However, let me take you back to the here and now and what a business can do to start their own process towards being more sustainable and self-sufficient. It has to start with setting your own strategy and taking a deep look at the markets you operate in and your competitiveness; what I am referring to is your ability to invest and still effectively compete: the value to your customers in you being more sustainable in your business and how this then relates to your ability to assess the price point impact. Once you have assessed this then taking a medium to long-term view at proven renewable technologies and your ability to access/utilise them – some will be immediately ruled out but you will be left with some options that you can then take a realistic view on a programme towards implementation. Do not pin your hopes on hydrogen being the replacement fuel – it will become a viable fuel for some but not all and generally speaking hydrogen clusters seem to be looking more viable than a national replacement network. Start with your own transition plan and make some smaller changes with a longer term view to watch the technologies evolve and ensure you are in a position to navigate your way to Net Zero when the opportunity arises.

Director at Contract Energy Services Limited
Neil is an expert in the UK and European energy markets. His in-depth knowledge and experience on the development of renewable projects including Solar PV, Bio-generation and new technologies provide us with some interesting insights.

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