UK Energy Update
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The British Minister of Commerce and Energy Kwasi Kwarteng today issued an urgent appeal to some of the largest energy groups in the UK to avoid a crisis in the industry, as there are growing concerns that record high natural gas and electricity prices may bring a “tsunami” to suppliers. .
Since the beginning of August, five smaller suppliers have closed down because of soaring wholesale prices, the company’s inadequate hedging strategy or weak balance sheet is unable to cover the energy costs they promised to supply.
CEOs of large suppliers are increasingly worried that the five suppliers with 570,000 domestic customers, including People’s Energy and Utility Point, are just the tip of the iceberg.
Energy consulting company Baringa said, “By the time we pass the winter, there may be fewer than 10 suppliers.” According to Ofgem’s latest market share data, as of the end of March, there are still 49 domestic suppliers.
A director of a large energy supplier called this situation “unprecedented” and said that there may be a “tsunami” of supplier failures, which will put severe pressure on Ofgem’s process to ensure that customers of these businesses are redistributed to another company. .
Michael Lewis, CEO of Eon UK, told the Financial Times In an interview last week The situation facing suppliers is “extremely challenging” because the market was “fragile” even before the recent wholesale price spike.
He pointed out that after setting price caps for 15 million households to limit supplier profits in 2019, the industry as a whole is at a loss.
Today, I will talk to the CEO of the UK’s largest energy supplier + operator to discuss the global natural gas situation
The UK has a diversified source of natural gas supply, and its production capacity is sufficient to meet demand
We don’t expect a supply emergency this winter
-Kwasi Kwarteng (@KwasiKwarteng) September 18, 2021
Ofgem appointed EDF Energy on Friday to take over 220,000 of Utility Point’s customers, but it has not yet designated an alternative supplier for People’s Energy customers.
Kwarteng said in a tweet on Saturday morning that today he will talk to the CEO of the UK’s largest energy supplier and operator, but added that “the UK has a diverse natural gas supply source and has enough capacity to meet demand. “.
“We don’t expect a supply emergency this winter,” he said.
Kwarteng added that energy security is an “absolute priority” and the government is working with Ofgem and natural gas operators to monitor supply and demand.
Record-setting natural gas prices are having an impact on the entire British economy, forcing the closure of two large fertilizer plants in northern England this week and threatening the supply of products ranging from meat to steel.
Ed Miliband, Britain’s shadow business secretary, accused the government of “nowhere to be seen” earlier this week.
People familiar with the matter said the talks will take the form of a separate call to the chief executives of major suppliers such as British Gas and Scottish Electricity.
Natural gas prices in the UK and Europe have repeatedly hit record highs in recent weeks, as traders worry that continental Europe will enter the winter, and inventories hit record lows. After a long period of cold weather last winter, the storage facilities have been exhausted.
Reduced supply from Russia, and due to the delay in maintenance by gas field operators compared to last year, reduced domestic supply has restricted the injection into storage facilities during the summer.
Soaring natural gas prices have had a knock-on effect on electricity prices, especially in countries such as the United Kingdom where fuel is the largest single source of power generation.
Low wind speeds have exacerbated high electricity prices, while power outages at other power stations, as well as a fire on the main British submarine cable from France on Wednesday, have caused people to worry about whether there will be sufficient supply in winter.