Energy Rationing Fears grow due to low UK gas reserves and Russian opportunism

With record high wholesale energy prices and numerous other issues to contend with, energy suppliers won’t be happy to hear the increasing warnings over a potential shortage in gas supplies this winter as fears mount that Russia could engineer an energy supply crisis.

Why the concerns?

Why is the UK at risk?

The UK is massively reliant on gas and is exposed to any such restrictions Russia may impose on Europe.

UK gas reserves are already at very low levels due to a combination of cost-saving, a harsh 2020 winter and a surge in demand around the globe as economies reopen following the ending of Covid-19 lockdowns.

This perfect storm has left the country relying on importing energy from Europe via gas and electricity interconnectors.

According to a new report released by Oil and Gas UK, imports of gas hit a new record high in 2021 with 56% of the gas imported being used to power homes and run power stations.

Despite all the talk of going ‘green’ the UK is now one of the biggest consumers of gas in Europe, with 85% of all homes reliant on it to heat their homes and water. 35% is used by businesses and for electricity generation.

Another finding of the report is that, overall, the UK still gets 73% of its total energy from gas and oil with the bulk of it coming from production on the UK Continental shelf.

“The UK is more vulnerable to a gas supply crisis than other Western European countries. It has way too little storage and it is buying more Russian gas than it realises through the Netherlands,” said Marco Alverà, chief executive of the Italian pipeline and infrastructure group SNAM.

Also read: How should Energy Suppliers explain Energy Bill Increases?

Record high gas prices to make for a grim winter for many

Most energy suppliers have been forced to hike their prices, with some already making two or three rises before the winter begins.

Gas prices have surged due to the combination of geopolitical factors with British futures contracts for November hitting a record high of 135 pence per therm last week, a figure that is three times higher than normal.

The high gas prices have prompted Centrica, owner of British Gas to warn that energy-intensive businesses in the UK could be forced to curb their activity this winter for demand to be achieved.

If the winter is particularly brutal many businesses may have to shutter temporarily to ensure that domestic customers have enough supply to stay warm. Gas providers have been unable to replenish supplies during the summer as demand and competition from Asia snapped up supply.

“We haven’t seen a price situation like this before. If you can’t attract supply the only alternative is to cut demand to balance the market. If we do see a supply crunch this winter the other way to balance the market is through economic activity. If prices are really high then some gas-dependent businesses in the UK and Europe may simply decide to not produce,” said Cassim Mangerah, an energy trader at Centrica in an interview with the Financial Times.

Whatever happens, energy suppliers need to be ready for a challenging winter and do what they can to support their customers and the most vulnerable.

Also read: Add your Customers to the Priority Service Register with Dyball’s CRM

Looking to enter the UK energy market? Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence. 

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help. 

Further Reading

UK Energy supply market undergoing a period of consolidation says new report

What are the Digital Tools an Energy Supplier should use to attract more customers?

What is the Warm Home Discount Scheme and what does it mean for energy suppliers?

Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers to get set up and start supplying.

For more information on how to start and manage an energy company, get in touch with Dyball Associates today.