A brief history of the UK energy crisis – and what to expect next

16 February 2023

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A brief history of the UK energy crisis – and what to expect next

The global energy crisis has emerged as one of the key disruptors of the past two years, leaving individuals and businesses facing higher-than-expected bills and the threat of energy shortages. But how did we get here? And what does the future hold?

Crises rarely form in a vacuum. They’re the product of a host of contributing factors, triggered by external events that damage certainty and offset the status quo. Such is the case with the present energy emergency, which came about through a succession of issues and problems that were impossible to predict.

That’s the past, but what about the future? To predict that, it’s necessary to examine the events that shaped the present situation.

So, that’s what we’ve done, piecing together a timeline of events which contributed to the energy crisis, before setting out what we believe the next 12 months might bring for our business energy customers.

The UK energy crisis: A timeline of key events

January 2021

As a result of the Brexit transition, the UK Emissions Trading Scheme (UK ETS) replaces the UK’s participation in the EU ETS, resulting in price volatility and market uncertainty.

A colder-than-average winter in 2021 also led to an increase in energy demand in some areas of Europe.

April to June 2021

Low wind speeds across Europe during this period affect the UK’s proportion of wind generation, which is much higher than that of most of mainland Europe.

September 2021

With the world emerging from a post-Covid slump after nearly two years of a record-level low in gas prices, the rapid economic rebound saw prices begin to soar. With industries like travel and hospitality requiring more energy at a similar period, demand outstrips supply and causes energy prices to rise rapidly.

The huge increase in gas prices forces some energy suppliers in the UK to go out of business. By the end of December 2021, 28 energy companies close their doors, affecting over two million customers.

All told, gas prices in the UK more than quadruple during this period to 180 pence per therm. In September alone, the price of gas rocketed by 70%.

October 2021

 A fire at the IFA1 interconnector – a high-voltage cable used to import electricity from France – causes a full outage. Capacity reduces, and the interconnector is expected to function at a reduced capacity until late 2022.

February 2022

The conflict between Russia and Ukraine causes further difficulties with the UK’s energy supply. Although the UK does not directly import its gas from Russia, many countries reduce or end their gas imports from the latter, causing a scarcity of available gas as a result.

April 2022

The EU introduces regulations for energy storage, requiring all member states to fill in at least 80% of their storage capacity by November 2022. This is intended as a safeguard to ensure countries have energy reserves to survive winter 2022/23, but it does place significant demand on energy supplies – the impact of which contributes to market volatility for the remainder of 2022.

June 2022

Russia reduces natural gas flows through Nord Stream, with supply running at 40% capacity in June 2022. Flow is reduced further in July, before being shut down fully in August.

Following an explosion and a fire, Freeport LNG is forced to close its 15 million-tonne-per-year plant in Quintana, Texas.

October 2022

October 2022 proves a pivotal year in the ongoing energy crisis, with the launch of the energy price cap for domestic users. 

Meanwhile, to support businesses with their energy bills, the government launches the Energy Bill Relief Scheme. The EBRS provides discounted energy rates for business consumers for six months from 1 October 2022 to 31 March 2023.

November 2022

Energy regulator Ofgem announces its price cap is set to rise to an annual level of £4,279 in January 2023.

January 2023 

The UK government announces a new scheme to replace the EBRS, which will come into effect from 1 April 2023. These changes, outlined in full here, will see a shift in how energy discounts are applied and the value of those discounts.

Other factors which have shaped the energy crisis

  • The UK’s overreliance on gas for heating and cooking, despite having some of the lowest amounts of gas storage capabilities in Europe, means we’ve been particularly exposed during these challenging times
  • One of the UK’s largest natural gas storage facilities, Rough, is closed in 2017, with the government declining to subsidise the cost of ongoing repairs and maintenance. This explains why the UK has so little gas storage capacity compared to equivalent EU countries. Owing to the energy crisis, Rough has since been recommissioned and is expected to reopen next winter.
  • Over the past decade, five nuclear power stations have closed in the UK, including Wylfa, Dungeness B, Hunsterston B and Hinkley Point B. Though not directly related to the energy crisis, these closures may be of detriment to the diversity and resilience of the UK’s energy supply.

Predicting the future of the energy crisis

So, what does the future of the energy crisis look like? And, more importantly, when can energy users expect a return to normality?

Unfortunately, we’re not quite out of the woods yet, with many in the industry predicting that the energy crisis won’t let up until 2024.

First, the bad news. It’s predicted that we’ll still be facing similar issues this time next winter, with the market expected to reach a “new normal” in mid 2023 – meaning high prices becoming the norm across the country.

Even so, prices are set to remain volatile for a long time, especially if the UK continues to rely on imports – which is likely until we become more self-sufficient with our energy supply.

As such, the view is that we’ll be well into 2024 before energy prices start to come down.

There are some positives to speak of, however. As more sustainable products make their way into the market, and new sources of gas are utilised, prices should start to stabilise.

And that’s seemingly what’s been going on as of late. Dirty coal and clean renewables have been used to substitute gas in electricity generation.

Elsewhere, it’s been reported that across the EU between March and September, there was a record year-on-year increase in solar and wind electricity generation. This is reflected in official EU energy consumption figures for October and November 2022, which show a 24% reduction in natural gas consumption compared to the five-year average.

For businesses specifically, news of changes to the EBRS (announced on 9 January) will no doubt have raised concerns. But the good news is that the end of the EBRS is not the end of energy relief altogether.

EBRS will be replaced with the newly announced Energy Bills Discount Scheme (EBDS), a more scaled-back version of its predecessor, from 1 April 2023. You can find all the need-to-know details about the new scheme in our complete guide here.

How can businesses manage their energy costs?

With the energy market unlikely to change for the foreseeable, businesses are encouraged to do what they can to keep their energy costs as low as possible. Further measures to consider include:

  • First and foremost, it’s critical that you’re providing actual meter reads to your energy supplier, particularly if you don’t have smart meters in place (something we would encourage you to rectify). Without actual reads, your supplier could invoice you based on estimates, which could easily be higher than your real consumption. No business wants to pay more for energy when they don’t need to, or find themselves having to make catch-up payments in the future when estimated reads are lower than actual consumption.
  • We would encourage all businesses to conduct an energy audit in the first instance, as this will provide invaluable insights into current consumption and pain points; our comprehensive guide can take you through the process step by step. If you lack the means or expertise to carry this out internally, an energy consultant can conduct a thorough audit on your behalf. Learn more about how energy management partners can support your business.
  • Investing in more energy-efficient equipment that could save money in the long term. This extends from A-rated computer monitors to appliances like fridges, coffee machines and dishwashers that could account for a large quantity of your daily power consumption.
  • “Load shifting” is commonly used to control energy costs. It allows businesses to avoid high-demand periods when energy may be more expensive. Shifting high-consumption activity to off-peak times could help you to better manage ongoing energy costs.
  • Investing in more energy-efficient equipment that could save money in the long term. This extends from A-rated computer monitors to appliances like fridges, coffee machines and dishwashers that could account for a large quantity of your daily power consumption.
  • Stop with the standby! Let your team know how important it is to switch off computers, air con and lights at the end of each day
  • Speaking of lights, making the switch to LED bulbs is a good idea too; they’re up to 80% more efficient than fluorescent ones. You could even invest in occupancy sensors to ensure you’re only lighting rooms that have people inside them
  • Carry out maintenance where it’s needed. As well as heating your building to the recommended temperature, insulate your building in the necessary places, replace old air conditioners (and ensure air con filters are free of dust), and place any thermostats away from radiators and windows.
  • Power Purchase Agreements (PPAs) are becoming an increasingly popular way for some businesses to save on energy costs. Essentially, these long-term renewable electricity supply contracts create an agreement between business and supplier, which can benefit businesses in the following ways: 
    • Long-term protection against the risks that relate to energy market changes
    • Ensures that the amount of energy to be supplied, energy costs and non-energy costs are all agreed upon in advance
    • Providing a means of generating income from renewable energy assets, allowing large energy consumers to sell excess energy to the national grid at an agreed rate
  • Explore the possibility of combined heat and power, which can equate to a typical energy saving of around 20%. Also known as cogeneration, this is a process that captures and utilises heat produced through electricity generation. CHP Focus is a BEIS initiative offering information and advice on CHP. Learn more here.

At SEFE Energy, we’re doing all we can to help our customers and offer support through the energy crisis. For more help and advice, check out our dedicated support hub or contact us today.

The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of SEFE Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. SEFE Energy accepts no liability for any errors, omissions or representations.

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