23 Sep The energy crisis explained: what is it and when should you renew your contract?
The UK energy market has hit the headlines recently, following the ongoing energy crisis. Increased demand for global energy has caused a significant rise in market prices. This increase is due to a number of factors including a cold spring, less wind and a large demand for energy in Asia post-lockdown.
Energy prices for both domestic and business customers could be heavily impacted. And as the energy market continues to fluctuate, many are asking the question: when is the right time to renew my energy contract?
We take a look at the reasons behind the energy crisis, and what you can do to manage your energy.
What is causing an energy crisis?
Soaring wholesale energy prices have exceeded 2008 levels when the recession was in full swing. This has occurred because of reduced energy supplies coupled with a large demand.
Peaks in the market have been attributed to several factors, including a high demand for liquefied natural gas, low supplies, and cold weather. It has also been the UK’s least windy summer since 1961, resulting in limited wind power.
The UK and EU usually collect and store gas in the summer months, when prices are lower. The gas is then stored until it is required in colder, winter months. But the unexpected cold during the spring, along with a low level of renewable generation, meant that high demand for gas continued for a longer period. Leading to the depletion of stored gas which would have normally been replenished.
The increase in prices comes as millions of homes in the UK face the prospect of a 12% rise in energy bills from October. This is due to the higher price cap that is coming into force.
Don’t leave it too late
The energy market is constantly fluctuating. And while waiting it out until prices go down may seem appealing, it is not advised. While there is a chance that this may happen, there is an equal chance that prices will continue to increase.
Energy prices could continue to rise significantly in the future. This all depends on the weather that we experience over the coming winter period. Meaning that without a plan on how you are going to manage your energy bills, you could be at risk of rising prices. it is important that you secure your upcoming contract renewals as quickly as possible.
Understanding your risk management is vital when deciding on the best time to renew your contract. If you are not due for renewal until 2022 then you have more time to think about what would be most advantageous for your business.
The importance of flexibility
Deciding when to renew your contract is already difficult and stressful. And deciding on what kind of contract you need can complicate matters further. Understanding your current usage and areas of high consumption is vital when deciding what type of contract would work best for your business. Factors such as the length, fee, and rate must also be taken into consideration.
A fixed contract secured at the wrong time could mean that your business pays more for its energy than it needs to. Meaning you could fall behind competitors that opted to renew their contract at a different time, or chose to be more flexible.
And a flexible contract will allow your energy bills to flow with the peaks and troughs of the energy market. With a flexible contract, you can also spread out the purchasing points. This gives you a wider time frame, so you can also simultaneously spread possible risks in terms of market fluctuation.
How can ESS help?
Understanding which energy contract is best for your business can be frustrating and confusing at the best of times.
At ESS, our clients are our priority. We have over 12 years experience and a comprehensive range of energy management services. We observe the energy market and strike when the iron is hot. So that you don’t have to worry, and can invest your time elsewhere.
Get in contact today to learn more about how ESS can help you decide on the most effective contract and advantageous time to renew.