03 Jan Winter Energy Market Volatility
The National Grid has warned consumers to prepare for price volatility, and although it may be well known to anyone who pays for gas and electric, it is only understood by a few why energy prices alter.
We at ESS are here to help you understand the impact of price volatility, every step of the way.
Tis the Volatile Season
Extreme weather conditions have characterised 2018, so inevitably it has made the wholesale markets uncertain. And, the winter weather may well provide another shock, regarding the cost of people’s energy bills.
During this time of year, there is not much that isn’t affected by the cold climate. From transport accidents to broken boilers, British winters are associated with expensive pay outs, and not to forget the seasonal festivities that have recently taken place. It seems that the consequences of the ‘Beast from the East’ are continuing to take their toll with regards to unsettled weather changes this year. With the cold months soon approaching, it may be a good idea to revisit your energy contracts.
What is market volatility?
As supply levels decrease, there is more demand for energy, making the markets fluctuate throughout the year. For this reason, energy bills become volatile unless you have a fixed contract.
Consumers, businesses, power suppliers and investors have all benefited from increased renewable power. It is seen to lower costs within global energy markets and reduce the effects of climate change. However, fast growth in renewables has altered energy market volatility, commonly associated with the changing seasons. The clean power extracted from hydro, solar and wind is entering the market, which is more dependant on factors such as weather conditions and the amount of daylight.
Arguably, this could suggest that market volatility a sign of good things to come. It means that renewable energy is on the rise. The correlation between the storage levels during the winter heating period suggests that the volatility in the energy market will increase. Because of this, it is important to revisit contracts within this competitive market – especially around this time of year.
Preparing for Price Volatility
Knowing about energy markets may not be your top priority, but it is for us. Our services help businesses to budget correctly, since we can negotiate with suppliers to get you the best price, saving you money.
ESS also create your utilities asset database and expenditure profile, and use those to monitor peaks in your spending. These patterns will display the rate of your business’ consumption and help us to identify measures to curb the increased demand.
For instance, with the flexible generation capacity, utilities are harnessing that volatility by reacting quickly when price spikes occur. Shutting down gas plants when the price drops for example, can save investors and energy users a lot of money in the process. Whilst the method may highlight a risk on the economic growth, it can also present opportunities for consumers to react accordingly by adjusting their generation output.
ESS are happy to answer any smart policy, market volatility or energy price questions that you may have. Similarly, we provide fully fixed long-term contracts for maximum risk protection and predictability, making sure that you are getting your money’s worth with regards to supply and demand strategies.