Energy regulator Ofgem has warned that we may see faster rises in domestic energy bills this winter. From October, the typical household was estimated to be paying £800 a year more for energy, however, these forecasts now look too low.
An industry analyst has said a rise of more than £1,200 a year could be predicted, leading to the average customer paying £3,363 a year from January, up from the likely £3,244 a year from October. In comparison, as it stands, customers are paying roughly £2,000 a year.
The current rates took a £700 increase in April after Ofgem adjusted the energy price cap, leaving 23 million households in England, Wales and Scotland dealing with the soaring costs of wholesale energy prices.
Currently, the energy price cap is set every six months and its job is to place a limit on how much suppliers can charge for the standing charge and per unit of energy. Meanwhile, the are suggestions that the process will change to a three-month period.
The continued volatility in gas prices has led to pricing dynamics, in addition to other factors such as the ongoing war in Ukraine. This has led to prices now looking higher than the estimates back in April.
It is expected that an official announcement will be made in the coming weeks regarding energy bills. To combat these rises, the government set up a new scheme to help lower-income homes through direct payments. This support will support homes with the cost of living and cover energy bills.
With more energy price rises, customers have been searching for alternative ways to save money on their energy. One method households are using is to find a cheaper supplier. You can search here to find the cheapest energy deals on the market.
Energy suppliers have also faced increased criticism from Ofgem, with direct debit demands increasing more than necessary. MPs have been alerted of this issue and there will likely be an update about the situation in the coming days.
In addition, there has been blame placed on Ofgem for the record number of suppliers collapsing during the energy crisis. 30 energy suppliers went bust, leaving only 26 suppliers in the market.
This led to roughly 2.4 million customers automatically being placed with another energy provider due to their own supplier folding. Worryingly, customers then had to pay an extra £30 a month for the duration of their original contract, then placed on a more expensive tariff according to Citizens Advice.
To add to the worries, a total of £2.7 billion has been the estimated cost of these energy supplier failures. This price will be passed on to UK households to the tune of about £94 each.
There could be huge changes to this figure too as the predictions don’t include the multi-billion collapse of Bulb Energy as the firm is currently placed in special administration.
The National Audit Office (NAO) has been severely dissatisfied with how Ofgem allowed the UK energy market to develop while vulnerable, as well as set a “low bar” approach for new energy suppliers to enter the market for more competition in an industry dominated by the six big companies.
Energy Giant Shell Warns Of EU Energy Rationing
It cannot be ruled out that Europe may have to ration energy as Russian gas supply worries increase. A tough winter is predicted for European citizens as energy prices are set to rise significantly.
Energy prices skyrocketed early on in 2022, then came a disastrous soar after Russia invaded Ukraine. Now, Russia has been accused of limiting supplies as means to use gas “as a weapon” in response to EU sanctions.
Just last month, Germany, one of the biggest nations in Europe took a step closer to gas rationing, triggering the “alarm” stage of an emergency gas plan. This plan is used to manage energy shortages when there are signs of tighter supplies.
Looking at the highest point of the German emergency plan sees the state intervening and prioritising energy usage for emergency services and homes, diverting energy away from less important sources.
Germany is one of the numerous European nations looking to reduce their reliance on fossil fuels and have a stronger renewable profile. This has led to more energy providers using green energy. An easy way to find which providers use renewable energy is to see if you could save money, you can find a green energy supplier here.
Due to 10 days of annual maintenance work of the Baltic Sea pipeline Nord Stream 1, gas supplies to Germany from Russia were halted, however, lingering fears remain that supplies may not restart.
Furthermore, Italian energy giant Eni has stated that Gazprom has only provided half of the requested 63 million cubic metres per day needed. Growing concerns that Russia is using energy as a war tactic have led to countries searching for alternative supplies.
With a tough winter facing all EU nations, some may be better prepared than others, but all counties will likely have to face the reality of very significant escalations in energy prices.
As it stands, Russia supplies 40% of all the natural gas in Europe, just showing how reliant nations are on Russian supply. In addition, of all the EU’s imported oil, Russia supplies 27%, totalling €400 billion a year to Russia.
The problem is that countries are now trying to wean themselves off Russian fossil fuels. By the end of 2022, plans are in place to ban most oil imports, however, agreeing on further measures such as outright bans is proving is harder than first thought.
During the summer months, EU nations have begun to store gas in preparation for the harsh winter months where demand for fuel is high. Russia’s recent actions of reducing supply have unfortunately meant it has been a huge struggle to build up sufficient reserves.
The target for winter fuel supplies is to be 80% full. Currently, Europe’s gas stocks are 62.6% and fears are that the target won’t be reached. Concerns are that further supply cuts from Russia could mean competition for supplies would increase between EU nations.
Russia has also suspended gas deliveries to nations such as the Netherlands Finland, Denmark, Poland and Bulgaria as they refused to pay in roubles. The UK is more reliant on Norway for supplies, with a third coming from the Scandinavian country and fewer than 5% of its natural gas Russia dependant.
The UK will still be impacted by supply distribution, even though it isn’t supplied by Russia as the effects will be seen across the energy market. There are talks between the UK government and Centrica about the re-opening of a giant gas storage facility to protect supplies if Russia decides to cut energy off.
Disused Mines Could Provide Heating For Homes By Floodwater
Disused coal mines in Wales could be repurposed to become a green energy source to heat homes in the UK. Current investigations are underway to locate the perfect spots to pump the naturally heated water to communities.
Roughly £450,000 is to be spent on the project by the Welsh government to lower energy bills for customers as well as improve Wales’ carbon footprint.
After the mines closed down, all of the pumps were shut off leading to flooding in the mines. The underground water has now become naturally heated and it will be used to help reach the nation’s target of becoming carbon neutral by 2050.
The water from the disused mines will be extracted and then later sent to a heat exchanger. Here, some heat will be recovered and amplified by a heat pump. Next, the heat is transferred around a heat network to local communities, heating homes and businesses with the water then being returned underground.
The project will focus on lowering bills for customers which could have an extremely positive impact due on the current energy crisis. Homes in the UK are tracking their usage to try and spend less. By using this free and easy to use electricity usage calculator, homes and businesses can simply view energy usage, helping to save money and reduce energy bills.
Of the £450,000 budget, some will be used by the Coal Authority to focus on feasibility studies. These studies will help to find the ideal spots where heat can be taken from the water of the disused mine.
Each one will be bespoke, however, the project will hopefully mean that customers won’t have to pay any more than they currently are for their heating, with the goal of significantly lowering energy bills for consumers.
At the moment, most Welsh homes are heated by gas, meanwhile, by 2025, newly built houses in Wales won’t be connected to the gas mains. The new technology means that there could be a ready-made alternative to traditional heating methods.
In England, there is a £9m programme in Gateshead that recently became the UK’s largest mine water heat scheme. The Gateshead project will provide up to half of the required heat that homes, businesses and public buildings need.
However, there have been some troubles facing the project in Wales. In recent months, there was a halt to plans for a mine water scheme in Caerau, Bridgend county. Early reports state that the scheme would have been too expensive with alternative options being considered.
In Taff’s Well, Rhondda Cynon Taf, a primary school and pavilion will be heated by a thermal spring in a similar project. From the spring, water is pumped to roughly 21C to a nearby heat exchanger.
The same technology will be used in the South Wales coal mines with the potential of providing cheaper energy to local communities all under the feet of the nation. In addition, this source of energy lasts for the long term, essential for dealing with the current climate change crisis facing the planet.