Rising energy prices: What it means for your business
Energy prices have been rising over the past few years, propelled by the COVID-19 pandemic and still look to remain challenging in 2022. In 2021, gas and power prices reached all-time highs and supported energy prices have continued into the first quarter of 2022.
But what is the true cost of rising energy prices and how can you tackle them? Let’s first look at what’s currently happening in the energy market.
What’s happening in the energy market?
The current market conditions are a result of the limited European gas supply, surging regional emissions markets, and an increase in energy demand in the wake of the COVID-19 pandemic. Wholesale energy power and gas prices witnessed strong downwards moves during the 2021 festive period. However, market prices are still very high compared to historic averages. Continued uncertainty is expected with price fluctuations leading to a more frequent and intense ‘peak and recover’ cycle.
Europe gas supply remains variable, with limited Russian exports having added storage withdrawal demands through Winter. Leading to an increase in costs as the fuel is critical to regional power balancing efforts. Geopolitical tensions between Russia and Ukraine have exacerbated this, and concerns have risen around the potential for conflict leading to limited Russian gas exports due to sanctions.
Further impacts to the UK marketplace from limited French nuclear capacity mean adding to prolonged and costly gas and carbon-intensive coal fired power generation. Adding to upside support on emissions markets, with both UK and carbon benchmarks hitting all-time highs in February 2022.
Alongside this, regional energy demand and limits on energy supply have driven strong levels of backwardation in both gas and power forward curves. Those later dated futures contracts currently sit at strong discounts too e.g., 2022 period contracts, offering some insulation against severe unit rate gains for longer dated fix-term contracts.
To top off the uncertain market, there are changes to the non-commodity (third-party) element of energy bills with the upcoming Targeted Charging Review (TCR) and introduction of the Green Gas Levy to consider.
What this means for your consultancy
Being deep in the unknown when it comes to managing your client’s energy isn’t the best position to be in when they’re looking to you to solve their energy price puzzle. The uncertain market being influenced by geopolitical events, the aftereffects of the pandemic and a cultural shift in the way we work, all need considering in all energy procurement decisions.
The cost of not being able to make key trading decisions at short notice may result in your client paying more for their energy. In today’s market, ensuring your clients achieve the best price possible is crucial to their ongoing business and loyalty.
So how can you ensure you are the most trusted advisor when it comes to energy procurement?
Having access to industry tools and services can help you better manage your clients energy in this uncertain time. Ensuring you have live market prices and can make the best recommendations possible for your client.
Market Eye
Market Eye is one of the leading tools for live energy market prices. Viewing key traded periods for UK gas and electricity to help secure your clients the best price possible and displays implied prices when there’s no traded price for a particular period.
Providing clients with up-to-date market prices is fundamental to mitigate re-tendering. Building trust with your clients to make the right purchasing decision at the right time for them whilst optimising your income.
But simply having access to live market prices alone isn’t enough to ensure your clients energy strategy is right for them. That’s where energy management software comes in. This can help you better manage your clients’ utilities, giving you an overall picture of where they’re at. Monitoring and targeting allows for easy identification of waste or overspend and allows them to be tracked.
When is the right time to buy? And how?
With current energy buying challenges, how can you support businesses looking to renew ensure they’re buying at the right time and covering all their options for the best price possible?
Our experts can offer you not only a clear view of the market, but a range of flexible buying and risk management solutions. With flexible solutions, market uncertainty risks can be spread out, enabling your clients’ to limit budgetary risk whilst taking advantage of lower energy costs if the market drops. We can work with you to understand your clients’ requirements to ensure they’re protected, now and in the future.
To learn more about Market Eye, our procurement solutions, or any other energy management software we can provide for you and your clients in this uncertain market, email us at sales@systems-link.com.
