At Here’s the Plan, we watch the wholesale energy market daily to spot trends and give our clients best advice as to when to renew their contracts. Wholesale energy prices are influenced by many factors, and we thought you might be interested in the key drivers:
Supply, Demand & Storage Levels
Energy Demand – When demand is high (e.g., cold winters or heatwaves), prices rise due to increased consumption.
Energy Supply – If generation is low due to outages, maintenance, or low renewable output, prices can spike.
Energy storage- the UK has little gas storage, so our pricing is heavily influenced by how full European gas storage is at key times in the year.
Fuel Costs
Prices of natural gas, coal, and oil directly impact energy rates, as these fuels are still widely used for electricity generation.
If global fuel prices rise, energy prices tend to follow suit.
Renewable Energy Availability
Solar and wind power generation affects prices—when conditions are good (sunny, windy), supply increases and prices drop.
A lack of renewable output means more reliance on gas or coal, pushing prices up.
Geopolitical & Global Events
Conflicts, sanctions, trade disputes and disruption to shipping channels can disrupt fuel supply chains, causing price spikes.
The war in Ukraine had a major impact on gas prices and, in turn, electricity costs.
Power Plant Availability & Maintenance
Scheduled or unexpected outages at power plants can reduce supply, leading to price fluctuations.
If nuclear or fossil fuel plants are offline, alternative (often more expensive) energy sources must be used.
Market Trading & Speculation
Wholesale energy is traded on markets like the UK’s EPEX and Nord Pool. Speculators and trading patterns influence price movements.
Prices can be volatile due to investor sentiment, short-term supply concerns, or hedging strategies.
Government Policies & Regulations
Carbon pricing, subsidies, and taxes on fossil fuels can make certain energy sources competitive.
Renewable incentives can help stabilise prices by encouraging cleaner, more consistent energy generation.
Weather & Seasonal Factors
Extreme weather events (storms, heatwaves, droughts) impact both energy demand and supply infrastructure.
A mild winter, for example, can lower gas demand and ease prices, while a harsh winter drives them up.
In short, wholesale energy prices are constantly shifting due to a complex mix of market dynamics, fuel costs, policy decisions, and external shocks. Some influences are seasonal and relatively predictable, others less so.
Businesses often feel the impact in their bills, especially when wholesale prices remain high for extended periods so must consider these factors as part of their risk management strategy when deciding when to renew and how long a contract to commit to.
The Here’s The Plan team is always happy to help -
☎️ 01738474630
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