On the 15th September 2021, one of the major interconnectors between the large nuclear power stations in France and the UK grid set on fire. This interconnector supplies the UK with enough power to supply 2,000,000 homes. Due to the damage caused by the fire, the interconnector isn’t expected to be back in use until April 2022. This has had a massive knock on effect on the electricity market, we saw rises of over 200% in the wholesale price of electricity overnight. This added to the already very high market, due to a poor year of wind and solar production, and increased non commodity costs with TCR charges, has made the current market very volatile. This drop in electricity import also increased the demand for gas to produce electricity.
The gas market has also seen massive increases this year. We have seen an approximate 250% increase in the wholesale costs since January. This is down to a number of factors. The reduction in solar and wind energy production, along with increased demand as the country comes out of COVID restrictions, has pushed the prices up. This added to Russia reducing their supply that they import to the UK, and the demand in Asia for Liquefied Natural Gas, has caused a national gas shortage.
Hopefully there will be light at the end of the tunnel. We hope that the Nord Stream 2 supply pipe from Russia to Europe gets EU approval, this will mitigate the increase on demand and hopefully we will see a drop in the market. Along with the reconnection on the interconnector early next year, we hope prices to come down soon.
If your contract ends in the coming months then please get in touch as we are here to help and advise. If your contract ends after April next year, then it MAY be beneficial to leave until the market settles.
Anyone who has agreed a contract through GMG previously that has yet to go live will be protected as the contract was locked in prior to the market surges.