UA | Market Update: Navigating the Challenges of the UK’s Energy Landscape

Market Update: Navigating the Challenges of the UK’s Energy Landscape

20 January 2025

As we enter 2025, the UK’s energy market continues to face significant challenges. Despite efforts to reduce our reliance on fossil fuels, the country remains heavily dependent on Liquefied Natural Gas (LNG) imports, which leaves us vulnerable to global events that are beyond our control. This means that, unfortunately, the UK is still at the mercy of external factors that can drive up energy costs and introduce considerable risk into the market.

Key Causes for Concern

Several issues are contributing to the ongoing volatility in the energy market, making it difficult to predict where prices will go in the near future:

1. Lower-than-usual gas storage – At this time of year, gas storage should be at higher levels. However, due to colder-than-expected weather, there has been a need for earlier withdrawals, putting additional pressure on supply.

2. Escalating geopolitical tensions – Ongoing conflicts in the Middle East continue to impact global energy markets, with further instability in Russia and Ukraine also influencing gas prices and supply routes.

3. Damage to gas pipeline infrastructure – The attempted damage to gas pipelines, especially those linked to Russian exports, has added another layer of uncertainty and risk to energy supplies.

4. Halting of Russian gas imports – The complete cessation of Russian gas deliveries, along with LNG tankers from the region, has further disrupted the global energy market.

5. Risk of Increased Demand from China and Asia – As global LNG demand rises, particularly from China and other Asian markets, competition for supplies could led to higher prices and limited availability.

Why Long-Term Contracts Are More Competitive

Given the current uncertainty in the energy market, you may notice that the most competitive offers available are those with longer-term contract lengths. This might seem counterintuitive, but there’s a clear reason behind it:

• Gas and power delivered in two or three years is priced more competitively than current supplies. Why? Because there is more risk associated with short-term supply due to ongoing geopolitical issues and unpredictable weather patterns.

• While we can’t predict what will happen in the coming years, securing a longer-term contract could help shield you from the fluctuations in supply and price that are likely to continue in the short term.

The Road Ahead for the UK’s Energy Independence

Looking forward, the UK’s energy strategy is focused on reducing reliance on imports and boosting domestic renewable energy generation. However, as it stands, the country still lacks sufficient renewable energy infrastructure to meet demand on its own, and this is likely to remain the case in the foreseeable future.

Until we have a more robust renewable energy infrastructure in place, we will continue to rely on LNG imports, which means we will be subject to the prices set by other countries and global supply chains. This situation reinforces the importance of securing a price you are comfortable with and locking it in for as long as possible to mitigate risk.

How Utility Aid Can Help

The good news is that working with Utility Aid means you never have to deal directly with energy suppliers again. We manage everything for you, from procurement to ongoing support, so you can focus on running your business while we take care of the details.

Our services include:

• Procurement and Expertise: We offer expert procurement services, securing the best energy contracts for your needs.

• Invoice Validation: We perform retrospective validation of all invoices to ensure you are not overpaying or underpaying.

• Account Management and Support: Your dedicated Account Manager is always available to assist with any queries or contract changes.

• Customer Care: We handle all supplier queries, providing peace of mind when issues arise.

• Market Intelligence: You’ll receive ongoing updates and insights into market trends, keeping you informed about the state of the energy landscape.

• VAT and CCL Assistance: We help with VAT and Climate Change Levy (CCL) matters, ensuring that you’re compliant and not overcharged.

• Energy Efficiency and Carbon Net Zero Support: We provide tailored solutions to help you reduce energy consumption, meet carbon reduction targets, and achieve greater sustainability.

Conclusion

The energy market is still fraught with volatility and risks, but with careful planning and strategic procurement, you can mitigate some of the uncertainty. By working with Utility Aid, you’re not only securing the most competitive energy prices but also gaining access to a comprehensive suite of services that ensure you stay on top of your energy management. Lock in the best deal for your needs today, and let us take care of the rest.