The Dirty Dozen
Before this current crisis of energy suppliers going bust there were around 80 in the UK.
The word on the street is that this crisis is not yet over, but once it is, we many only have around twelve suppliers left in the marketplace. It’s a staggering change, and will be a new world order.
The ones remaining will be those that were more risk averse and/or of a bigger size. It really depended on whether these companies were set up for the long haul and therefore not so susceptible to changing market conditions.
How these companies bought their energy, trading in the energy markets, was one component of their downfall. Being a smaller company with ambitions to grow quickly by borrowing too much is another factor. Without any kind of buffer to guard against tough times, they were always at risk to the elements.
And how does this affect the market, as a consumer of energy whether for the home or business.
It seems likely we need to be braced for tough times ahead. The cost of energy is soaring, some prices virtually double what they were a few months ago. And the problem is, this does not look like a temporary blip. Sorry to be the purveyor of doom, but we need to be aware of how it will affect us over the next year and beyond.
At the start of this crisis the thinking was that come May next year we may see a bit of a drop in prices, perhaps not large, but still a drop. This confidence seems to be waning due to the continued fallout of energy suppliers. There are costs to be incurred by surviving suppliers If they take on customers from the ones that have gone bust, they have to go to the market and buy energy. And as previously mentioned those prices are high.
What has caused this:
• Large demand for gas throughout the world, China alone increasing demand by over 8% and shipments went there, leaving Europe depleted
• Russia did not increase its exports to Europe, despite high prices
• Around half of the UKs electricity is generated by burning fossil fuel
• There have been several problems in the UK electricity system
• And there are other issues with old nuclear power plants, wind turbines not contributing as much and a power cable between France and Kent going off line until late Spring next year due to a fire
• Low storage capacity for gas
• The business model of new suppliers that joined in the last few years, as mentioned above
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