Why are Energy Prices High Compared to a Year Ago?

Why are Energy Prices High Compared to a Year Ago?

Posted on September 13, 2023

Energy price increases

It’s no secret that energy prices have soared recently, with many families struggling to pay their energy bills. It’s been headline news for a while now. But why have prices shot up so much and will they ever come down? Let’s look closer at this issue which impacts all our lives.

Why are energy prices so high?

As you might expect, there’s not just one reason as to why the energy prices have soared recently. A whole combination of factors have resulted in high bills and people looking for alternative ways to reduce their energy bills. Here’s a summary of the main contributing factors.

  • A global increase in gas

Increases in demand generally lead to higher prices and decreases in demand tend to lead to lower prices. A global demand for gas following COVID lockdown periods in 2021 saw prices rise significantly. Furthermore, a lack of wind in the summer of 2021 resulted in higher demand for conventional power which didn’t help with the price hike.

  • Delayed maintenance work

COVID-19 has a lot to answer for when it comes to energy prices. Maintenance that was meant to take place in 2020 got pushed back to 2021 due to lockdown periods. In 2021, gas production hit a record low of 363TWh, 47TWh below the previous record low in 2013. This caused prices to rise. Low production was the result of extensive summer maintenance and the closure of major terminals and pipelines which served the UK.

  • Gas storage

Gas storage in the UK is minimal, with capacity at less than 2% of the UK’s annual demand. Unfortunately, the UK’s main gas storage facility was closed in mid-2017. This means the UK now has to rely on imports from Europe, increasing its exposure to international demand. To make things worse, European gas storage remains low. It’s not totally clear how this will be replenished.

  • Political instability

The UK gets almost half of its gas supply from Europe. Therefore, wholesale gas and power prices in the UK are subject to knock-on effects of political instability such as Russia’s invasion of Ukraine.

Will energy prices ever go back down?

Households will see another fall in their energy bills from 1 October after a drop in the price cap. That said, energy prices are likely to remain high into 2024. This could happen if the Chinese economy strengthens quickly or if we experience a harsh winter. Both factors could push gas prices up again.

Can heat pumps lower my energy bills?

If you’re looking for an alternative way to heat your home, you’re not alone. Many households are opting for heat pump installation as a way to save money. With the right setups, heat pumps can reduce energy bills as well as your carbon footprint. According to research, switching to an air source heat pump can reduce your annual fuel bill by as much as £780, with larger savings for those switching from electric, coal or LPG systems. Heat pump grants are also available to help with the cost of installation.

Find your MCS certified engineer today for all your air source heat pump needs. Aura Heating’s engineers are both Gas Safe registered and MCS certified, and work across the South of England to bring greener energy to homes. We cover Hampshire, Surrey, Sussex, Dorset, South London, Berkshire and Wiltshire.