As we enter summer 2020, as a direct result of the COVID-19 pandemic, businesses across the length and breadth of the UK are still focused on shoring up and protecting their operations, with the aim of ensuring they can resume normal service in the near future. However, for the reasons we will outline in this article, this is also a time to step back and take notice of the historically low price of energy, and how, with prudent action, your business could save large sums in the years ahead.
Interesting times for the wholesale energy market
Even before COVID-19 hit our shores wholesale energy prices for gas and electricity were already on a downward trajectory. When it did arrive in early 2020, the pandemic pushed prices even further down, to a decade low for gas and a four year low for electricity (see graph below).
Due to extensive media coverage, many will be aware that the energy sector has been facing enormous pressure in recent weeks. Principally due to the lack of demand for oil caused by global lock-downs and the resulting oversupply of fuel, wholesale oil prices at the end of April were half of what they were in January 2020. This is only part of the wider picture; there have been a number of other events which are causing significant disruption in the wholesale energy market, most notably:
- Crude oil prices have continued to fall due to fears of a second wave of Covid-19 infections
- Suppliers have been selling vast amounts of energy at heavily discounted rates as a result of lack of demand from customers
- The wholesale energy market has seen an increase in negative energy pricing
- The UK is seeing a significant amount of oversupply of oil and gas, which is expected to be driven further by the use of solar energy generation in the summer and the delivery of eight cargoes of LNG from the UKCS gas fields
- Record low levels of gas consumption due to one of the warmest Aprils on record
Taking an even wider perspective, the UK economy suffered its biggest contraction in Q1 since the 2008-2010 financial crisis, with Q2 expected to be hit even harder. These factors are, and will continue for some time to place UK energy prices under pressure, and will potentially push them even lower.
To put the current prices in context, consider that in September 2018, the wholesale day-ahead rate for electricity was £67.69 per megawatt-hour, today it is £21.60, and whereas gas was 73.72 p/therm in September 2018, today it is at 9 p/therm.
Locking in today’s energy prices for the long-term benefit of your business
It is a common misconception that businesses under existing energy supply contracts cannot take advantage of the historically low wholesale market prices we are currently seeing.
We cannot emphasise enough that irrespective of when your current energy contract ends, your business can lock in today’s price ready for when it expires. We are currently seeing extremely low market prices for energy, and your business could make considerable savings by taking advantage of these before they rise, as they inevitably will. Indeed, it is likely that when the immediate COVID-19 crisis starts to lift, and individual countries put in place less stringent lock-downs, the demand for oil and gas will start to rise, and prices will correspondingly rise. This is further compounded by the knowledge that even though COVID-19 will likely be a clear and present danger for months to come, demand, and hence, prices of energy will rise higher in the coming winter.
How Maximeyes can help your business take advantage of today’s wholesale energy prices
Maximeyes are one of the UK’s leading utilities solutions consultants to business and specialise in reducing the cost of electricity, gas, water, telecoms and waste services. We will show you how your business can secure the current low pricing available for gas and electricity as a result of the COVID-19 pandemic, even if you are under an existing long-term energy supply contract. Due to our comprehensive knowledge of the UK energy market, we are helping businesses in a range of sectors lock in prices for 24 months or longer. Furthermore, we offer a highly popular weekly market tracking service to enable businesses to decide precisely when to lock in a price for their energy supply.
COVID-19 is unprecedented in modern economic times and has threatened the success and even the survival of thousands of businesses across the UK. As all successful business leaders know, however, opportunity lies in every crisis. Locking in today’s low energy prices may reduce your future energy bills by a significant percentage in the coming years. Leveraging this opportunity will help your business weather the long period of recovery ahead.