Business Energy Market Update: May 2024

The month of April saw electricity prices for Q2 and this Summer stay fairly constant. Energy prices for Autumn saw gains of £6/MWh and Winter 24 closed roughly 8% higher than at the start of the month and looking further out, contracts increased across the whole of 2025. The gas market was also bullish and wholesale prices rose roughly 7% across all forward contracts as concerns over supply in 2025 grow.

Since the conclusion of OFGEMs consultation into standing charges which saw more than 40,000 businesses and domestic customers share their thoughts on the recent changes and increases to this fixed cost, there has been very little news. Whilst scrapping the charge altogether is a popular suggestion some experts have suggested this could see energy charges rise more steeply than otherwise whilst the market normalises. 

The Welsh government has also recently joined the debate saying a move to abolish the standing charge would encourage homes and businesses to reduce their energy use, a measure which would have an environmental benefit. Further to this they have suggested standing charge discounts on days where less or no energy is consumed, which may benefit some businesses at weekends, and the introduction of social tariffs for vulnerable users. Standing charges in Wales are generally higher than the rest of the UK and on average, have more than doubled in the last two years.

As we get further into the year, look out for further news from COP28. Since December, there has been precious little from the government about what out the next stage in the UK’s “ambitious environmental agenda” actually looks like. With the next general election due to take place before the end of January 2025, existing uncertainty and lack of clarity around energy legislation and regulations is causing frustration amongst the business energy community despite prime minister, Rishi Sunak, promising to unveil new plans.

During the event it was agreed that following the Paris Agreement, actions at a global level remain far behind that which is urgently needed across emissions reduction, adaptation, and the finance required to underpin these. It is likely the major parties are working on the next round of Green initiatives ready for their respective campaigns and whilst it is hard to make predictions, it is likely that further environmental taxes and incentives will be put forward.

Staying firmly on the topic of Green energy, Equinor have received consent to double capacity at the existing Sheringham Shoal and Dudgeon offshore wind farms. The decision will see enough renewable generation added to power an additional 785,000 homes in the UK. Whilst the schemes contribution towards Net Zero is laudable, it shines a light on the need for more onshore wind. Estimates by BEIS show that it costs roughly £63 to generate a megawatt hour of electricity using onshore wind energy, in comparison with £106 for offshore wind. With wholesale electricity prices trading at an average of £69/MWh in April, developments such as these, whilst necessary, will not contribute to lowering energy bills in the near term.