What goes up must go down but for now – at least – the cost of fossil fuels is soaring. In fact, this factor is the primary cause of the dramatic increase in UK wholesale electricity prices in 2021. In just 12 months, electricity prices have quadrupled.
It’s not the best news to start the year. The unprecedented price hike will inevitably lead to more expensive utility bills for consumers, likely pushing millions more people into energy poverty. It is estimated that the average annual bill for households could leap from £1,277 to in excess of £2,000 after April.
So, besides the hole about to be burned in our budgets, what trends are predicted for the energy sector in 2022?
The current UK energy crisis is purely a reflection of a fossil fuel crisis. Add net-zero energy goals and climate change into the mix, and green energies look to be a more enticing alternative to traditional fuels.
Global demand for energy is at an all-time high meaning supply chains are likely to incur issues. The petrol shortage last year demonstrated that supply chains are already stretched incredibly thin. Increasing pressure on the energy sector could put us at breaking point. As a result, the economy – which is only just beginning to stabilize – could be impacted.
According to the latest research by Cornwall Insight, there is just £2 per year difference between the cheapest energy deals and the Default Tariff Cap. The lack of competition is also due to energy companies dropping like flies. Nearly 30 companies have gone bust in the last year, 26 of which disappeared since August.
With the rise in demand and popularity of smart meters, the energy sector has accumulated data silos. However, the sector has yet to keep up with its data management policies and processes. Failure to address this issue leaves energy companies open to cyber-attacks. The National Cyber Security Centre (NCSC) reported that it has defended the UK from a record number of cyber attacks more recently. This includes attacks that targeted supply chains. Bear in mind, successful attempts could have disastrous repercussion.
Leading experts have stepped in to offer their opinions on the unsustainable increase in energy prices. Some industry leaders have suggested the UK needs to take a £20 billion loan to assist. Others believe that increasing taxes for North Sea oil companies – who reaped the benefits of higher gas prices – to help fund more affordable bills. A smaller group called for plans to remove VAT, but the Prime Minister scrapped that idea quickly.
While the forecast seems to be all doom and gloom, we pride ourselves in being a small, family-run service and put our clients at the heart of everything we do. If you choose to work with us, we will put our decades of experience to use to help you navigate the rocky landscape safely.