UK energy prices are reaching highs that have not been experienced in over a decade. A cold spring, less wind and a large demand for energy in Asia post-lockdown are some of the factors contributing to the current energy crisis.
As we enter colder months, it is uncertain how volatile the energy market will continue to be, and what this could mean for businesses. This turbulent time is making many question whether when right time is to renew energy contracts, and if not now, when?
We take a look at the reasons behind the energy crisis, and what you can do to manage your energy.
Why are energy prices rising?
High demand for gas and electricity, along with a reduced supply, has caused the soaring wholesale prices. Recent peaks have even exceeded 2008 levels, when the recession was in full swing. These peaks have been attributed to several factors, including a high demand for liquefied natural gas, low supplies, and cold weather.
The UK and EU usually collect and store gas in the summer months, when prices are lower. The gas is then stored until it is required in colder, winter months. But the unexpected cold during the spring, and a low level of renewable generation, meant that high demand for gas continued for a longer period. Leading to the depletion of stored gas which would have normally been replenished.
The increase in prices comes as millions of homes in the UK face the prospect of a 12% rise in energy bills from October. This is due to the higher price cap that is coming into force.
Get ahead of the game
The energy market is constantly fluctuating. And while waiting it out until prices go down may seem appealing, it is not advised. While there is a chance that this may happen, there is an equal chance that prices will continue to increase.
Energy prices could continue to rise significantly. This all depends on the weather that we experience over the coming winter period. And for this reason, it is important that you secure your upcoming contract renewals as quickly as possible.
Understanding your risk management is vital when deciding on the best time to renew your contract. If you are not due for renewal until 2022 then you have more time to think about what would be most advantageous for your business.
Deciding when to renew your contract is already difficult and stressful. And deciding on what kind of contract you need can complicate matters further. Factors such as the length, fee, and the rate must all be taken into consideration when deciding what type of contract would work best for your business.
Energy markets will always be volatile. And a flexible contract will allow your energy bills to work with both the peaks and troughs. With a flexible contract, you can also spread out the purchasing points. This gives you a wider time frame, so you can also simultaneously spread possible risks in terms of energy market fluctuation.
How can Monarch help?
The previous 18 months have been confusing and frustrating. But choosing when to renew your energy contract doesn’t need to be. Our procurement experts are here to help you understand what is best for you and your energy.
With more than 30 years of experience, we keep a close eye on the energy market and strike when the iron is hot. So, you don’t need to worry, and can invest your time in other priorities. Our efficient cost management services will make sure your business has a contract that is most efficient and effective to its unique needs.
Get in contact to find out how Monarch can advise you on the best options for you for renewing your energy contract.