Wholesale energy prices update - May 2024

The AquaSwitch business energy price update provides an overview of the current events that are driving wholesale energy prices.

May 2024 overview

The AquaSwitch business energy comparison service helps companies compare fixed-rate electricity and gas contracts available on the market. The rates on our comparison service are influenced by the wholesale prices of energy available in the market.

Since 2022, the conflict in Ukraine has sparked an unprecedented European energy crisis. In response to economic sanctions by European and Western countries, Russia severely restricted the natural gas supply to Europe, causing energy prices to soar.

Energy prices spiked in the Autumn of 2022 but have since eased due to a coordinated effort in the industrial sector and through increased liquid natural gas import capacity.

As of May 2024, wholesale energy prices are significantly below their peak but remain about double the historical average due to the continued pricing pressure caused by the absence of cheap Russian gas.

Market Analysts Cornwall Insights, are forecasting a gradual easing of energy prices through 2024, attributing this to a relatively mild winter leaving European Gas Storage levels higher than anticipated.

Wholesale gas prices

Forward Wholesale Gas Prices Graph - April 2024

Source: Ofgem wholesale market indicators report

The UK has two factors that make it susceptible to the current energy crisis. The UK uses much more gas than it produces from the North Sea and has limited capacity for gas storage.

The twin impact of this is a continual reliance on gas imports, which are achieved through pipelines from Europe or from LNG imports. Europe itself is highly dependent on importing natural gas from Russia.

On 24 February 2022, Russia invaded Ukraine, resulting in significant economic sanctions being imposed by European nations.

Russia has responded to the economic sanctions by gradually starving Europe of its usually reliable gas supply. Without Russian gas, demand in the market significantly exceeds supply, and wholesale natural gas prices soared.

Wholesale electricity prices

May 2024 forward wholesale electricity prices graph

Source: Ofgem wholesale market indicators report

Wholesale electricity prices have broadly maintained the levels seen since the start of 2023 due to the increased cost of electricity generated by gas-fired power stations.

The national electricity grid relies on gas-fired power plants to meet electricity demand. This is especially true on still days when wind farms do not generate green electricity. The continued dependence on producing electricity through gas combustion means that electricity prices correlate closely with gas prices.

What can my business do about the cost of energy?

The open market for business energy encourages suppliers to compete against each other to offer the best prices. Make sure your business is paying the best possible business electricity prices and gas rates using our free comparison services:

For more information on the pricing structure of the products offered by business energy suppliers, check out our complete guides to:

This page was written and reviewed by our energy experts Tom Melhuish and Ben Brading, and is updated on a monthly basis.