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The UK's Gas and Power Market in 2023: An Energy Market Review

Updated: Dec 6, 2023

In this energy market review 2023, we delve into the dynamic landscape of the UK's gas and power market. This comprehensive analysis merges the overall market trends with specific day-ahead market data to offer an insightful perspective on how the energy sector evolved throughout the year.

2023 Annual Energy Review banner featuring a serene blue-toned landscape with wind turbines in the foreground and mountains in the background. A dynamic white graph overlay signifies energy market volatility, with peaks and troughs spanning across the image. The year '2023' is prominently displayed in the sky, merging with the thematic elements. Below, a logo for 'Smart En. Co.' is paired with text that reads 'Discover trends and key points throughout the year,' inviting viewers to reflect on the past year's energy developments

Market Summary: Key Trends and Developments

  1. Renewable Energy Growth: A key highlight of 2023 was the significant growth in the renewable energy sector, particularly offshore wind, contributing 24.2% to the UK's electricity mix in Q1.

  2. Retail Energy Market Competition: The year witnessed heightened competition among retail energy suppliers, leading to more attractive prices and discounts for consumers.

  3. Price Volatility: Both gas and electricity markets experienced substantial price volatility, influenced by supply-demand dynamics, geopolitical tensions, and global economic conditions.

  4. Geopolitical and Economic Influences: Global events, including tensions in the Middle East and economic trends in major economies, significantly impacted the energy market, affecting prices and supply chains.

Day-Ahead Market Data Analysis

  • Start of Year: The year began with high prices, notably in December 2022, with gas reaching 350 p/th and electricity peaking at 412 £/MWh.

  • Mid-Year Trends: A noticeable moderation in prices was observed mid-year, with gas dropping to around 65 p/th and electricity to approximately 70 £/MWh.

  • End of Year: The closing months of 2023 saw fluctuating prices, with gas ranging from 92.50 to 119.90 p/th and electricity prices varying between 65.00 and 142.00 £/MWh.

Market Highs and Lows

  • Highs: Extreme spikes in early 2023 were the year's highs, driven by cold weather demands and supply shortages.

  • Lows: Mid-year lows were attributed to improved supply situations, warmer weather, and a surge in renewable energy contributions.

Current Market Scenario

As of early December 2023, the market is displaying relative stability but remains sensitive to changing global and local factors. The current gas price stands at 98.00 p/th and electricity at 113.00 £/MWh. The graph below shows the movement of wholesale energy prices over the last 6 months

graph to show last 6 months wholesale market movements

Concluding Insights

The year 2023 in the UK's gas and power market has been marked by a series of highs and lows, reflecting the sector's responsiveness to a range of influencing factors. From the growth of renewable energy to the impact of geopolitical events, the market has navigated through a complex array of challenges and opportunities.


 

Ofgem's Crackdown and New Regulations: Implications for Businesses and Benefits for Consumers


Ofgem's Investigations and Fines

  1. Maxen Power Supply Ltd Investigation: Ofgem's probe into Maxen Power Supply Ltd focused on ensuring fair treatment of business customers and appropriate rates, especially concerning microbusiness transparency​​. For UK businesses, this emphasizes the importance of vigilance in their energy contracts and the regulator's role in protecting consumer interests​​.

  2. Hudson Energy Fine: A £1.7 million fine imposed on Hudson Energy for severe licence condition breaches, particularly overcharging business clients, sends a strong message about the importance of regulatory adherence​​. This case highlights the need for businesses to closely monitor their energy contracts and billing​​.

  3. BES Utilities Investigation: Ofgem's investigation into BES Utilities for potentially violating Standard Licence Conditions aims to safeguard customers from unfair terms in 'deemed contracts.' While not indicative of wrongdoing, it shows Ofgem's commitment to ensuring fair practices in the non-domestic market​​​​​​.

New Regulations and Support for Vulnerable Customers

  1. Standing Charge Adjustments: Ofgem's consultation on adjusting standing charges in energy bills is a significant move towards a more equitable billing system, especially for customers using prepayment meters and standard credit​​​​​​​​​​.

  2. Support for Vulnerable Customers: New regulations set to be implemented require energy suppliers to actively engage with and support vulnerable customers. This includes offering affordable payment plans and assessing their financial situation​​​​.

  3. Customer Service Accountability: Ofgem's commitment to transparency now requires suppliers to display their Citizens Advice ratings, aiming to enhance customer service standards across the industry​​.

  4. Future Collaborations and Metrics: Ofgem plans to collaborate with the energy sector to devise new customer service metrics, enhancing accountability and consumer protection​​.

  5. Industry Leader Expectations: Jonathan Brearley, Ofgem’s CEO, emphasized that all suppliers should aim to achieve high customer service benchmarks, warning of stringent actions against those falling short​​.

Conclusion

These actions and regulations by Ofgem mark a pivotal shift towards greater fairness and transparency in the UK energy market. They serve as a reminder for businesses to stay informed and ensure they receive fair and transparent service from their energy suppliers. For guidance and support in navigating these changes, businesses can turn to the Smart Energy Company for expert advice and assistance.

 

Forecast for the UK Energy Market in 2024


Looking Ahead to 2024: Key Energy Market Trends and Opportunities

As we transition from 2023 into 2024, businesses in the UK should be aware of several potential developments in the energy market. Staying informed and proactive will be crucial for navigating the upcoming year effectively. Here's what to look out for in 2024:


1. Continued Growth in Renewable Energy

  • Renewable Energy Integration: The trend towards renewable energy sources is expected to continue, with increased investments in solar, wind, and other sustainable technologies.

  • Impact on Market Prices: As the renewable sector expands, we may see a more stabilised energy market with potentially lower price volatility.

2. Policy and Regulatory Changes

  • Government Initiatives: Keep an eye on new energy policies or amendments, as these can significantly impact market dynamics and pricing structures.

  • Brexit Aftermath: Ongoing adjustments post-Brexit may also influence energy trade and regulations, affecting market conditions.

3. Advances in Energy Storage and Technology

  • Innovation in Storage Solutions: Advancements in energy storage technologies could lead to more efficient usage and distribution of renewable energy.

  • Smart Technology Integration: Adoption of smart grid technologies and AI-driven energy management systems may improve efficiency and reduce costs.

4. Global Economic and Geopolitical Factors

  • International Market Influences: Global economic conditions and geopolitical events will continue to play a role in shaping the energy market, particularly in terms of supply and pricing.

5. The Role of Consumer Demand

  • Changing Consumption Patterns: Shifts in consumer behaviour, driven by increased environmental awareness and the adoption of energy-efficient practices, could impact demand.

How the Smart Energy Company Can Assist

  • Get Ahead with a Quote: For businesses looking to manage energy costs effectively, it’s advisable to get a quote for any upcoming energy renewals. The Smart Energy Company can provide competitive quotes tailored to your specific needs.

  • Stay Updated with Daily and Weekly Market Reports: To keep abreast of these developments, subscribing to our daily and weekly market reports is essential. These reports offer up-to-date information and analyses, helping you make informed decisions throughout the year.

Conclusion

The energy market in 2024 promises new opportunities and challenges. By staying informed and leveraging the expertise of the Smart Energy Company, businesses can navigate these changes effectively. Whether it's securing competitive rates for energy renewals or staying updated with the latest market trends, our services are designed to support your business every step of the way. Get in touch with us for a bespoke energy quote and subscribe to our market reports for continuous updates and insights.

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Have More Questions?

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  • Why is energy procurement important for my business?
    Energy procurement ensures that your business secures energy contracts that are both cost-effective and aligned with your operational needs. Proper energy procurement can lead to significant cost savings, budget predictability, and reduced risks associated with volatile energy markets.
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    We specialise in analysing your energy consumption, understanding your specific needs, and leveraging our relationships with over 20 suppliers to negotiate the best possible contracts on your behalf. Our team ensures you get optimal rates, flexible terms, and contracts that align with your business goals.
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