The energy market and fuel prices are currently in one of its most volatile states ever, with costs rising to extreme levels. But what exactly has caused this? It seems to have been brought about by a ‘perfect storm’ of issues which, if occurring solely by themselves, would cause significant problems. But when they come along one after the other, they exacerbate each other.
The issues destabilising the market
When we go back to the initial outbreak of Covid, fuel supply was no issue and demand, as people stayed at home during lockdown, was low. But as the pandemic began to ease this was flipped on its head. Consumption rose and cool weather leading into the spring saw an extended period of demand which resulted in fuel stocks being unable to be replenished. Acold winter then saw further pressure placed on fuel reserves.
Coinciding with increased demand, Asia then outbid Europe for a proportion of the Liquid Natural Gas (LNG) supply and the issues didn’t stop there. Two major hurricanes hit the Gulf, low rainfall caused energy levels generated from hydro to drop, and France saw its nuclear facilities pushed offline with the UK exporting some of its fuel reserves across the Channel in a bid to support them.
All of these problems together saw carbon prices increase in line with the demand for fossil fuels. Meanwhile, storage levels for European gas only managed to reach 78 percent capacity, which is 10 to 15 percent lower than the normal levels they would expect at the start of the winter. This resulted in higher prices in the summer, and everyone across the global energy market delayed buying or signing new contracts in the hope costs would come down. But the opposite occurred with everyone rushing to buy last minute, which further sent a shockwave through the already simmering market.
As prices eventually began to cool, Russia then invaded Ukraine. The ensuing sanctions from nations worldwide and Europe distancing itself away from a dependence on Russian oil sawprices rise once more. And now there is little certainty that the global issues which havedestabilised the market can resolve themselves. There could be further issues ahead with new rules requiring European countries to bring storage levels to 85 percent, and then 90 percent next year, which is a big ask when considering levels in May sat at 43 percent across Europe.
The challenge for businesses
The issues outlined above present sizable challenges for businesses across the world in terms of their expenditure on energy, and there are some changes on the supplier side of gas which are presenting further complications. For example, some suppliers have huge standing charges but lower p/kWh charges, and it’s important to look at both costs together, not just the pence per kWh. Another point to note are the changes to Triads and the fixed charge that may be added to a standing charge, seeing them rise even further.
As energy costs soar, energy management and monitoring has never been so important. SMEs have faced an average gas bill hike of more than 250 percent in the last year alone. And this is expected to rise in October where forecasts predict that energy prices will increase further by 51 percent. Supply chains may get used to the current climate and begin to calm prices but any escalation on the aforementioned issues could have further impact. It’s therefore vital for businesses across all industries to assess in fine detail their energy outputs and where they can make savings.
How Pilot Group can help
Pilot Group specialises in this field, helping organisations across a variety of industriesstreamline their operations. Its easy-to-use Energy Manager 2.0 is designed to control and monitor energy systems for businesses ranging from SMEs to large enterprises, with its smart sensors and self-learning algorithm enabling heating systems to work more efficiently to reduce waste. Meanwhile its user-friendly portal can be accessed remotely from any location or device with an internet connection, empowering users to monitor multiple sites and make significant money and carbon savings. Averaging a 40 percent reduction in consumption from gas and heating, Pilot Group’s Energy Management System can be a powerful tool for businesses looking to cut costs wherever they can.
For any organisation which is looking at lowering its gas consumption against the backdrop of increasing prices, Pilot Group can help them make sense of their data and highlight a clear path towards meeting the challenge of rising energy costs head on. In these uncertain times, it could be worth a conversation to see what you could save.
Author: Josh Kirk, Pilot Group
Josh Kirk is a Group Marketing Manager for Pilot Group Ltd, who support organisations meet carbon reduction targets using technologies and lead the way in smart, safe and sustainable infrastructure solutions.
