What is in store for the UK energy industry in 2019? We’ve rounded up some of the UK’s top energy experts to find out…
What can we expect in terms of UK wholesale gas and electricity prices?
Edgar van der Meer is a Senior Analyst at NRG Expert. He predicts a “volatile” year for wholesale gas prices and electricity prices. “Many uncertainties exist in terms of the global energy markets, but the main driver of the fluctuations for the UK will be the exchange rate and the weakness of the Pound against the US Dollar. The UK is an energy-importing nation, and Brexit uncertainties will have a great impact on the price of oil for the UK as suppliers will be looking for guaranteed revenue and security. This will mainly affect the gas markets, but electricity markets will feel the pinch too, as higher upstream costs of the raw material fuels will trickle down to wholesale markets.”
What are your UK energy price predictions 2019 as a whole?
Edgar: “It is very difficult to predict global energy prices. Only a few months ago, the predictions seemed to line up that 2019 would see oil at around $70/barrel; however, this range is now anywhere between $55 and 90, depending on who is reporting. NRG Expert believes that there will be a supply glut as production will keep pace in non-OPEC countries, but demand will slow due to trade uncertainties between large economies. Here, too, Brexit will have an impact for the UK and the overall economic hit will be felt in markets.”
A spokesperson from Ofgem says: “Competition in energy is working better for businesses as a whole, but small and micro businesses continue to pay much more on average for their energy than larger businesses. There are rules so that micro-businesses (Britain’s smallest businesses) cannot be rolled over onto new fixed term contracts. Together with Government, we will work to review the need for stronger protections for micro-businesses from potential sharp practices by brokers.”
How will the energy price cap affect business energy customers?
Edgar: “Business energy customers will have no direct impact of the cap on default tariffs for consumers who do not have supply agreements in place. As would make sense, small businesses and other large consumers of energy should shop around and find the best deals for their needs to ensure stability and the most savings. Should the price caps have the desired effects, it could mean an economic boost in spending by consumers which will help (primarily) the retail and small business sectors.”
Ofgem confirms that “the price cap only relates to household customers who are on poor value default deals. 11 million households on these deals set to save around £76 on average under the cap.”
In terms of energy generation, do you think renewable energy generation will continue to increase? What about coal-fired power?
Edgar: “Renewable energy will continue its upward march; however, the ambitious targets set in the past will likely be missed in the longer run up to 2030 and 2050. Lower energy prices for oil and gas (despite recent increases) have slowed investor confidence in renewable energy projects, so it is up to the government to step in and offer the incentives and regulate the polluting industries simultaneously. Coal-fired power is making a small come-back currently, with the economies of commodity pricing keeping it an attractive source of energy.
Ofgem: “The transition to a smarter, more flexible energy system is happening at a pace that nobody thought possible just a few years ago, and it is hard to make predictions on what will happen in the future. However, several milestones have already been passed, such as days where no electricity was generated by coal for the first time since the industrial revolution. Last year was also a record year for output from renewable generation with more than 30% of electricity in Britain coming from renewables.”
What non-commodity charge and regulatory changes are in store?
Edgar: “Data is a big new area for the energy sector with smart technology taking hold in our day-to-day lives and generating massive amounts of data on consumption and consumer behaviour relating to energy. We will see a shift in how this data and its acquisition and storage is regulated. Data regulation (industry focused) will be the biggest area for regulatory changes. Should the economy worsen, however, we would likely see more management and government influence in prices and stimulation to change suppliers as is being done with the price caps.”
Ofgem: “Some of the major changes involve overhauling rules that are 20 or more years old so that they don’t stand in the way of progress towards a smarter, more flexible energy system. We also want to get a better deal for businesses and all consumers on the next set of price controls that we will set for monopoly energy networks from 2021. We are proposing a far lower cost of capital (rate of return) for these controls than is allowed at present which will save businesses and households money.”
Ofgem has set out proposals to help deliver “a smarter, fairer and cleaner energy system which is fit for the future and saves consumers money.”
You can read more about these proposals here.
Edgar: “When it impacts the bottom line, consumers can be motivated to reduce their energy consumption. Mandatory schemes such as replacing incandescent bulbs with LEDs and giving houses energy ratings do help and are a big part in changing consumer behaviour, but the biggest shifts will come when the investment to go green equals the biggest returns for consumer pocketbooks.”
Ofgem’s 2018 State of the Energy Market states that domestic energy consumption has been falling over the last 15 years. On a temperature corrected basis, final domestic energy consumption fell by 17% between 2002 and 2017, despite increases in the population by 11%, an increase of 13% in the and number of households. The longer-term downward trend in domestic energy consumption may be due to a combination of:
- more efficient use of energy
- more efficient electrical products as a result of regulation and technological improvements
- decisions by households to consume less
Other 2019 energy industry predictions
Tim Cooper, client development director at Arcadis, says that that the energy market is experiencing a period of disruptive change, with new entrants shaking up the industry and the adoption of new technologies.
- Rising investment in renewable energy sources challenging the role of hydrocarbons.
- The real opportunities in the UK energy market remain uncertain.
- The impact of Brexit should be limited as EU members have been ’re-nationalising’ their energy policy. One area of potential impact is interconnectors investment, which enables energy to flow between networks and is planned to fill much of our energy gap.
- The UK’s commitment to a low-carbon economy will continue.
- Government is looking to secure £5bn in new money for energy-related capital investments across low-carbon energy, energy storage, hydrogen and electric vehicle (EV) infrastructure.
- We can expect to see national commitment to clean air obligations continuing to deliver opportunities, particularly in the near-term for EV and smart grids as well as major programmes.
Mike Wilks, Vice President at Capgemini Consulting, wrote an article on his key predictions for the industry in 2019:
- Enhancing customer experience and improving the customer journey through personalisation and streamlined processes, making it simple to switch suppliers and move energy plans. Investment in the customer interface will be a primary focus leading into 2019.
- Attracting, retaining or upskilling employees through leading-edge digital services and learning offers to cater to varying employee base expectations.
- According to our recent research, 100% of players in the energy market expect it to be completely turned upside down by digital disruption within the next five years, and 86% are said to already be transforming their business model as a result.
- Utility companies will really embrace advanced analytics to improve asset management and transform their business.
Smarter energy management
Whatever the future may (or may not) hold for the UK’s energy industry, one thing that we’re almost certain of is that our Smarter Business energy brokers can help your business save money on energy and other essential services. We’ll compare the market to find the best possible prices and help with ongoing energy management – at zero cost to you! Contact a Smarter Business consultant to request a free energy price comparison.