Energy in Autumn and Winter 2023: What’s the Story?
Energy security has been under threat while prices have been on the rise, culminating in wide scale hardship for homes and businesses in 2022. As we descend into Autumn, many businesses will be wondering how they can best prepare for the colder months ahead. In this article, we explain why the energy market is the way it is, what we can expect in 2023 and how your business can save on bills this winter.
It is no secret that 2022 was not a good year for energy, across both commercial and domestic markets. With blackout warnings; soaring energy costs; industry bankruptcies; business closures and higher rates of deaths linked to under-heated homes compared to previous years, many were glad to put winter 2022 behind them.
Yet 2023 brings with it fresh challenges and with autumn closing in, many businesses and households alike are concerned about energy in the coming months.
So what exactly can we expect to see across the energy market this winter? Will tariff prices exceed those of last year? And what can businesses do to reduce the impacts of any further energy cost increases or supply shortages?
How did we get here?
In order to analyse potential energy security risks for 2023, we must first cast our mind back and consider the factors which have shaped our energy market over the past couple of years.
In an article published last year, we highlighted how rising energy prices and lower energy security in 2021 “stemmed from longrunning disruptions in the construction of the Gas Nord Stream 1, several especially harsh winters and limited storage facilities.” Following oil price hikes attributable to the Ukrainian war and the closure of many large energy suppliers, the situation became graver still in 2022.
Many other factors were also at play including: the “economic rebound” of the COVID-19 pandemic; the impact of an extremely dry summer across Europe in 2022 upon hydropower generation/power plant cooling systems,and transportation issues globally.
What can we expect in 2023?
Bearing in mind the varied causes for the energy crisis of the past two years, not to mention the complex, ongoing geopolitical issues at play, can we really expect to see much improvement in energy prices this winter?
Improvements in 2023
Certainly, there have been positive developments in the energy market so far this year. For example, as one Good Energy article explains how “apart from a few cold periods, January and February 2023 [were] unseasonably warm.”
The article goes on to highlight that the silver lining of warmer winters and our cost of living crisis is falling demand for energy, which early this year was at around “85% – 90% of what was expected (as people have not been using their heating as much)”. Because of this, there were “still good levels” of gas in storage in spring 2023.
Lowered demand also contributes to a lower Ofgem price cap. According to the UK Government, “for the period of July to September 2023, the Ofgem price cap has been set at £2,074 for a typical household per year. For the period of October to December 2023, the costs of mains gas and electricity will fall further.”
The government also maintains that Liz Truss’s 2022 two year Energy Price Guarantee (EPG) will remain “in place as a safety net until the end of March 2024 should energy prices increase above £3,000 per year.”
New Energy Challenges in 2023
While lower demand and greater gas storage may stave off some concerns about energy security, energy prices remain a cause for concern within businesses. The EPG may be good news for households but as we all know, businesses are not protected by energy price caps.
From April of this year, the Energy Bill Relief Scheme which supported businesses and organisations between 1 October 2022 and 31 March 2023, was replaced by the Energy Bills Discount Scheme. This new scheme runs until 31 March 2024.
So, how does the Energy Bills Discount Scheme differ from previous legislation?
First of all, the new bill enforces a maximum discount cap of 1.961p/kWh for electricity and 0.697p/kWh for gas. Alongside this, there is a minimum energy price per kWh for the new discount scheme, which stands at 30.2p/kWh for electricity and 10.7p/kWh for gas.
Given that energy prices before 2020 were consistently below 20p per kWh for all business sizes (see graph below), 30.2p/kWh as a minimum rate to qualify for the scheme still marks a drastic increase in energy prices upon previous years.
What’s more, at less than 2p/kWh, the cap on business discounts is notably less generous than most would hope.
Commercial energy consumers on variable contracts have also missed out on discounts for most of 2023 due to “the government’s reference wholesale price being below the threshold price to receive a discount”.
Moreover, while lowered demand for energy due to the cost of living crisis spells a price drop, many of the other issues driving up market prices remain unresolved. The war in Ukraine rages on, extreme dry heat across Europe continues to threaten cooling and transportation systems and inflation has been increasing throughout 2023.
With all of this in mind, it’s fair to say that energy will continue to be a leading concern for British businesses this autumn and winter.
What can your business do about high energy costs this winter?
Although it is not the help package many businesses were hoping for, the Energy Bills Discount Scheme does offer some relief. Unfortunately, it is now too late to apply as applications ran from 26th April to 25th July this year, but you missed this opportunity, we recommend looking on Ofgem’s website for other local energy grants that you may be eligible for.
Of course, aside from making use of all available government support, the best way to protect your business against the energy crisis is to save energy. As we always say: the cheapest energy is the energy you don’t use!
Here are 10 tips you may find useful for energy saving this winter:
Seal up draughty spots around vents, doors and other openings.
Create heating controls based on occupancy, time of day or room temperature to ensure your heating is not being left on unnecessarily.
Look into replacing any inefficient old equipment, such as boilers, which could be costing you more than they’re worth.
Insulate your building efficiently, including any loft or liminal spaces.
Insulate pipes to ensure your hot water stays hot.
Install reflective foil behind your radiators to more efficiently heat your space.
Run a seasonal energy saving training session to ensure your staff are upholding energy best-practice throughout the winter.
Check any energy intensive machine systems such as manufacturing compressors for leaks.
Consider switching your operational schedule to make use of time of day tariffs or lower usage needs. For example, you could try to conduct all or most of your hot water-reliant activities close together, to minimise the amount of time your water heating system is left on.
Perhaps most importantly, start energy monitoring. Ultimately, energy saving opportunities vary enormously from business to business. That’s why you need to understand your energy usage -and thereby your energy waste- to rectify it. Once you’ve started addressing the energy waste issues in your business, you will be able to continually improve by tracking new issues as well as what savings your changes actually make.
If you’re worried about energy waste in your business, GridDuck can help. Book an informal, 15-minute meeting with our Sales team today to find out more.