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The UK energy market in 2024 explained

The UK energy market has fluctuated a lot since 2021, which has meant that energy prices have rocketed for customers. Read on to find out more.
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The UK energy market in 2021 explained

Energy customers in the UK saw dramatic increases in their energy bills thanks to wholesale energy becoming more expensive at the end of 2021 due to a range of factors such as high gas costs, low wind energy generation and a fire at the electricity interconnector between Britain and France. These high wholesale prices and increased general market volatility resulted in suppliers taking deals off price comparison websites like Uswitch. This is due to them trying to get to grips with the costs of supplying energy to you and wanting to adjust their tariff prices appropriately.

Increase in wholesale electricity prices caused by rising gas prices - if gas prices rise, the cost of producing electricity in these power stations rises and the cost of the electricity rises in turn. However, prices are currently dropping - UK energy statistics found that the price of wholesale electricity fell 75% between July 2022 and May 2023.

The price cap level has reduced far enough (currently £1,690 but then likely to drop again from 1 July) that it becomes the system by which standard variable customers will be charged again.

Can I switch? Should I switch?

There are fixed energy deals returning to the market, but given the continued market unpredictability, it's impossible to say whether one of these would be the right option for you in the long-term. The best thing to do is try and work out how much energy you're using and how much you're spending currently and base your decision on that.

Is the government doing anything about high energy prices?

There is currently no specific energy help available from the government. Previously, support was available in the form of the Energy Bills Support Scheme (a £400 discount on energy bills for all UK households) which was designed to help customers get through the 2022-23 winter.

There are currently no similar support measures being planned for the 2023-24 winter, but there are more general cost-of-living payments available for those on certain benefits.

These include:

  • £900 for those on certain means-tested benefits to be paid in spring 2023, autumn 2023 and spring 2024

  • £300 for pensioners (in addition to the Winter Fuel Payment) to be paid in winter 2023-24

  • £150 for those on disability benefits to be paid in summer 2023

  • Financial help from the Household Support Fund (via local councils).

How did we get here?

The energy market is rarely straightforward at the best of times, but the last few months of 2021 saw developments that have changed the way the market looks from a customer point of view.

From a customer point-of-view, the first sign that something was different about the energy market might have been in August 2021, when the level of the standard variable tariff energy price cap was raised to £1,277. 

Many customers looking to switch their energy deal in the wake of that news found that their potential annual savings were in the tens of pounds, rather than hundreds. In some cases, they might not have been able to save at all.

Wholesale energy price changes

Energy suppliers in the UK buy the energy they supply in bulk from the wholesale market. The price at which they buy the energy is the most significant driver of the amount they charge customers who sign up to their tariffs. The lower this is, the cheaper their tariffs will be - but the higher it is, the more expensive their tariffs will be. Unfortunately, this is the case at the moment.

Some of the reasons for this include:

  • British and European gas storage levels are at a historically low level, compounded by protracted cold temperatures

  • Low wind generation across Europe in 2021, which has increased demand from gas burning electricity-generating plants

  • Increase in wholesale electricity prices caused by rising gas prices - if gas prices rise, the cost of producing electricity in these power stations rises and the cost of the electricity rises in turn.

Will prices drop?

The one constant thing about the energy market is its fluctuation. This remains true - while prices have decreased, they remain much higher than they were two years ago and it’s difficult for anyone to formulate a view on where prices will go long-term.

The next price cap (running from April to July 2024) will be lower than the current one, but the one after that (announced in May 2024) is predicted to be even lower.

What happens if my energy supplier goes bust?

There's no need to panic if your energy supplier goes out of business as a result of these gas shortages and subsequent high prices. You'll be moved onto a Supplier of Last Resort by Ofgem - this could be any supplier that Ofgem deems a good choice to take on more customers. You won't lose your energy supply at any time. Your new deal may be more expensive than the one you were on, though, so you might want to see if anything else is available (though given the current situation, this might not be the case).

Which energy suppliers have gone bust as a result of the current situation?

As of May 2023, the following suppliers have gone bust largely due to the wholesale price rise situation:

  • PfP (approx. 80,000 customers transferred to British Gas)

  • Moneyplus Energy (approx. 9,000 customers transferred to British Gas)

  • Utility Point (approx. 220,000 customers transferred to EDF Energy)

  • People's Energy (approx. 350,000 domestic and 1,000 business customers transferred to British Gas)

  • Green (approx. 255,000 customers transferred to Shell Energy)

  • Avro Energy (approx. 580,000 customers transferred to Octopus)

  • Symbio (approx. 48,000 customers transferred to E.ON Next)

  • Igloo (approx. 179,000 customers transferred to E.ON Next)

  • Enstroga (approx. 6,000 customers transferred to E.ON Next)

  • Pure Planet (approx. 235,000 customers transferred to Shell Energy)

  • Colorado Energy (approx. 15,000 transferred to Shell Energy)

  • daligas (approx. 9,000 customers transferred to Shell Energy)

  • Goto Energy (approx. 22,000 customers transferred to Shell Energy)

  • Zebra Energy (approx. 14,800 customers transferred to British Gas)

  • Entice Energy (approx. 5,400 customers transferred to ScottishPower)

  • Orbit Energy (approx. 65,000 customers transferred to ScottishPower)

  • ZOG Energy (approx. 11,700 customers transferred to EDF Energy)

  • Together Energy/Bristol Energy (approx. 176,000 customers transferred to British Gas)

  • Bulb (1.6 million customers transferred to Octopus).

Are business energy customers affected by this situation?

Similarly to domestic customers, the business energy market is affected by high prices, but business customers looking to switch their energy are still free to run a comparison or talk to their supplier to see if they can negotiate a better contract than the one they're currently on.

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