February 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 February 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
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
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?
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