Photo courtesy of Jan-Rune Smenes Reite

In a new report, commercial energy and sustainability consultancy Advantage Utilities a full-service energy and utilities management consultancy, has warned that energy market prices could continue to increase this summer, with unplanned outages of gas fields limiting the UK’s gas-fired power generation capacity.

The supply of gas may be further disrupted by yearly maintenance which occurs during the summer, constricting the UK’s ability to increase gas flows. When unplanned outages are also factored in, output is further limited — a significant upwards driver of energy prices, especially during the summer months.

Though wholesale prices have dropped from the highs of last year, prices remain higher than pre-2021 levels. However, since early June, the market has rebounded slightly with prices increasing as a result of low levels of liquefied natural gas (LNG) cargoes reaching UK ports, low levels of wind causing a greater reliance on gas, as well as extended unplanned outages of gas fields.

Significant slowdown
International factors may also significantly increase LNG prices, with any increase in demand for gas in China threatening to start a trade war in Europe over LNG supply. Global LNG supply is expected to increase by 3.7% over the summer, yet this is a significant slowdown from the 6.4% of growth seen the previous summer. With China importing near to the top-end of the five-year rolling average in LNG imports, a question remains as to whether supply will remain plentiful for both Europe and China’s needs.

Current European gas storage levels are approximately 73% full this year, the second-highest level over the past five years, which has reduced wholesale LNG prices, but increased gas demand in the UK could push up prices, with added pressure and competition from China.

Andrew Grover, Advantage Utilities CEO, said: “Despite the recent fall in energy prices, a question remains as to whether this trend will continue or if prices will rise once again. From what we have seen in June, prices have in fact increased slightly and unplanned outages this summer could push prices up further.

“Furthermore, global factors also continue to impact energy prices within the UK so we will likely see more competition over LNG supplies in the coming months as demand increases while domestic production halts. That is why it is so important for businesses to keep track of current and future energy developments so they can plan budgets accordingly.”