The evolving energy market and its impact on consumers

Energy costs remain high for most consumers, a direct result of the impact of tensions with Russia and the pressures on supplies, specifically the reduced flows of Gas into Europe. There were assumptions how this would impact on consumers directly and indirectly.

Data published by the Department for Energy Security & Net Zero shows that energy consumption in Q1 2023 was in the region of 7% lower for both domestic and industrial customers, compared to 2022, despite the colder weather. Specifically, domestic consumer’s Gas use was 8% lower and Electricity 9.7%. Industrial was 2.7% and 7%. Carbon reduction measures had already encouraged less use through efficiency and renewable projects. Energy Trends June 2023 (publishing.service.gov.uk)

A recent survey from the Office for National Statistics showed that the cost of living was the biggest concern for 92% of contributors, above the NHS, the economy and the environment.

60% of people said their cost of living had increased, requiring 30% of people to use their savings, which may have benefitted from reduced spending during lockdowns. 96% said their food shopping bill had increased and 57% said their Gas or Electricity bill was higher.

As a result, most people surveyed were taking action, with 42% spending less on shopping and essentials and 63% less on non-essentials. Thought was given to how water was used by 72%. Although Gas and Electricity costs are high, the domestic Energy Price Guarantee (EPG) / energy price cap has protected consumers from some of the volatility. Public opinions and social trends, Great Britain – Office for National Statistics

Petrol and Diesel prices fell 22.7% in the last year to June 2023, helping to ease inflation, although Gas and Electricity increases for the same period of 36.2% and 17.3%, did not help. As a result, 47% of adults surveyed for a cost-of-living survey, said they were using less fuel in their homes. Cost of living insights – Office for National Statistics (ons.gov.uk).

Gas and Electricity wholesale costs have fallen significantly in 2023, but more recently they have struggled to find direction. The energy markets are factoring in improved fundamentals for winter 2023/24 compared to 2022/23, but an element of caution remains. Any further disruptions to supplies or a forecast of prolonged below seasonal norm temperatures, could see prices rise once again. It is generally thought we will not see wholesale costs return to what was regarded as the norm in 2020, for some time.

Government assistance for consumers has reduced due to lower wholesale prices and the high cost to provide both the domestic, EPG / energy price cap and the commercial Energy Bill Relief Scheme and Energy Bills Discount Scheme (EBDS). From April 2023 the EBDS provides assistance to those domestic customers on a commercial heat network, on registration.

There is currently little opportunity to contract below the domestic EPG rates, with the main incentive being to lock in for a period to avoid any further gains. The majority of households are hoping for signals that competition has driven prices lower, before contracting.

Companies are looking for the cheapest contracts when their current deals end. We are finding energy suppliers are more engaged than last year, so there are options from a range of providers, which underlines the importance of a competitive tender exercise.

Looking for ways to immediately reduce costs in the workplace may mean cutting business hours or changing shift patterns and at home, being more conscious of energy use.

Energy efficiency is now essential for most parties. Audits can identify quick and longer-term wins, with the next step being the consideration to install renewable technologies such as Solar Panels, to reduce exposure to energy markets and to potentially gain an additional income by exporting excess Electricity.

Should you wish to have a conversation to discuss your company’s options, Indigo Swan would welcome the opportunity to see how we can help.

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