In 2022 we saw a lot of volatility in the energy market, particularly with electricity prices. Due to many different reasons, electricity prices were up around 70% compared to 2021 last year. Although one of the main reasons for power being so expensive was the higher gas market is linked to the electricity market.
The price of gas was so high last year due to supply issues across Europe which were consequential of Russia’s invasion of Ukraine which led to them significantly reducing exports to the EU. This made the overall gas market rise. Due to power being priced based on gas-fired power plants when the price of gas rises so does electricity.
The war between Russia and Ukraine was not the only thing to blame for the electricity prices. France had issues with their nuclear power stations which reduced the amount of power the country could generate. This led to them taking a lot of exports from the UK.
The UK also had to export more power to Europe overall due to our strong LNG access and Frances’s drop in capacity. As the EU was struggling to build up supplies for most of last year, the UK had to become a net exporter of power.
Has energy prices dropped?
So far in 2023, gas prices have fallen due to warmer weather. Also, renewable generation is continuously growing in the UK with wind generating the most power in January this year.
However, despite the demand for more renewables in the UK, it is still taking too long for projects to be pushed through. Many people believe that renewable generation is one of the only ways to fully get the UK out of the current energy crisis as well as stabilise the UK energy market.
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