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In a move that would be seen as the biggest reform to the UK’s Energy Market in decades, Government Ministers are drawing up legislation to break the link in which the wholesale price of gas determines the cost of electricity for homes & businesses.

Jun 20 2022 10:48 AM

How are Gas and Electricity prices currently linked?

Over the Last 12 Months, the entire world has been living through a major fuel & energy crisis, as the wholesale price of gas & oil increased to record levels due, mainly in part, to the post-pandemic recovery resurgence alongside Russia’s invasion of Ukraine.

Currently, the United Kingdom generates around a quarter (25%) of its electricity from renewable sources, including Solar Panels and Wind Farms, however under current market rules, the most expensive Megawatt needed to match demand, determines the overall price for all electricity generation.  Currently this is gas.

With this being the case, there are calls for changes to be made in an effort to assist Homes & Businesses during the current Cost of Living crisis.

Will these changes make a significant difference? 

As the cost of wholesale gas reaches record highs, the cost of renewable energy generation has been largely unaffected by the current crisis.  According to data produced by the National Grid, on Saturday 11th June 2022, wind power generated 45.3% of British electricity, followed by nuclear at 21.5%, gas at 18.4%, solar 7.8% with many others in decreasing proportion.

For the same period, Coal accounted for none of our countries energy needs, which falls in line with our Governments promise and target to phase out this fuel by 2024.

With our Government investing in both nuclear & renewable energy alternatives in the upcoming years, it is feasible to believe by severing the link between rising gas prices and electricity generation costs, it will make a significant difference going forward.

Are these changes likely to help Homes & Businesses save Money?

Currently these new proposals are yet to be laid out in full, however it is anticipated these changes will be part of our Government’s Energy Security Bill, due to be made into Law in Autumn 2022.  Until these are published it is difficult to confirm the benefits to Homes & Businesses.

As an indication, The Energy & Climate Intelligence Unit recently published research advising Consumers could save an estimated £6.7billion per year if another fossil fuel crisis were to take place.  It is thought this is in part due to the development of Cheaper Wind Farms going forward.

It is estimated, if the United Kingdom reaches its target of generating 40GW of offshore wind electricity by 2030, these savings would rise to £26billion, equating to around £330/Home.

As Commercial Energy is purchased on a Live & Tradable Market, benefits would also be seen to industry, although difficult to calculate.

Is there anything Commercial Businesses can do to reduce ongoing costs at this time?

There are several opportunities for Commercial Businesses to look at reducing ongoing costs to help combat Rising Inflation and Energy Prices.  Cost Advice – Energy Specialists are here to help you and your business.

We are on hand to offer a Full Energy Health Check on all of your current supplies & agreements. 

Why an Energy Health Check?

Did you know that not all business energy contracts are the same?

Also, not all businesses should be charged the same costs.

Our health check looks deeper than just looking at your rates.

We recently identified £10,000 of annual savings for a museum group that were already being looked after by another broker.

If you would like any further information regarding the above, or if you have any questions regarding your current agreements, please contact Daniel Walker on 01246 252788 or by e-mail at daniel.walker@costadvice.co.uk and he will be happy to help.