Our Energy Specialists explain how and why energy prices have been rising.
The UK energy process is a simple one. Supplying energy to your home involves three key elements: making electricity through generation (power stations), transporting gas and electricity and selling it to the customer.
The UK for the moment has a strong over-reliance on fossil fuels, and in particular natural gas for electricity and heating. There has been a massive increase in demand for gas, so it’s no surprise that gas prices in Europe have more than doubled since the beginning of 2022 for the following reasons:
The Covid Pandemic. The price of wholesale energy rose sharply as a result of a rapid increase in demand for energy and especially gas in the UK as life began to go back to normal. This also coincided with major global economies climbing out of a pandemic-induced ‘recession’ at the same time.
Russia's invasion of Ukraine. Russia supplies a significant volume of fossil fuels to European countries. The supply was reduced because of the war. Although the UK only gets a small percentage of fossil fuels from Russia, the price we pay is strongly influenced by the European market.
The heavy reliance on gas for generating electricity. Most of the UK’s electricity is produced by burning natural gas. With the low supply of gas, prices went up which in turn put electricity prices up.
A hard winter for renewable sources. The supply of renewable energy was affected by the winter conditions as the UK saw a marked drop in the amount of wind and solar power generated. This came at a time when people were at home during Covid. Energy production was driven up and topped up by gas to supply demand.
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