Update on the Prices of Natural Gas in the UK

by | Sep 15, 2021

In recent months, prices of natural gas in Europe and the UK have increased to their highest levels in many years, which may cause a rise in household and business gas quotes. The increase in prices is primarily driven by the shortage of fossil fuels relative to the need to produce energy that can meet household and business gas demand.

In the UK, the prices have been the highest since 2005, with rates that have risen above 100p a therm. A therm is the amount of energy that natural gas contains and is sometimes used to calculate utility bills.

The crisis in natural gas is also a huge concern in Asia, as countries opt for liquefied natural gas (LNG) just to meet the strong fuel demand. According to the ICIS, an energy consultancy, the spot price of LNG went above £10.94 per million British thermal units (MMBTU). When converted to sterling, it is close to £10.21 per MMBTU.

Fossil fuels are the world’s most important sources of energy; various industries use them in different ways, such as power generation and heating. Due to its widespread use, experts in many countries fear that the demand will only continue to grow.

According to Tom Marzec-Manser of ICIS, it is surprising how the increase in prices causes concern. He added that Russia is the other major source in the industry, and so there are not many options for additional supply. As a result, traders around the world and various businesses are watching European prices while looking for business gas quotes.

A prolonged winter caused the reduction of storage levels in Europe. Meanwhile, Russia – the largest supplier of fuel – sent less gas to the rest of Europe, even before the pandemic hit. Critics are saying that Moscow is pressuring the continent to approve the launch of the controversial Nord Stream 2 pipeline within the year.

Moreover, Russia also refused to send top-up volumes via Ukraine in the past few months, even though there was an increase in prices and demand in Europe.

Russia is not the only factor. Many natural gas suppliers worldwide have become stricter in supplying fuel as big companies rebounded from the effects of the pandemic. Brazil increased its LNG imports because of the shortage of energy supply from its independent hydropower plants.

The US has also lowered output because of a series of outages and planned maintenance. US output of natural gas is one of the highest in recent years, but it has also been the lowest in the pre-pandemic forecast.

US prices also rose above £2.92 per MMBTU, but this is still lower than European rates. The reason for the difference is that there’s not enough LNG export capacity to have an effective single market shared between the two regions.

There is also a decline in the domestic production of LNG in European countries. The affected regions include the North Sea and Groningen, which are the largest onshore gas fields in the Netherlands. These have been forced to restrict their production because of natural causes, like earthquakes. However, the industry expects them to shut down permanently next year.

According to analysts, natural gas production in northern Europe has declined by about ten per cent in the first half of 2019.

This crisis on the decrease of supply is creating anxiety in countries as they face winter because of the increasing demand for heating homes and offices.

Alternative Energy Developments

In another light, a village in northeast England has received a 20 per cent H2 blend for ten months. The local gas distributor who provided the gas said that it is a ground-breaking energy trial. The UK’s Health and Safety Executive had already given the green light for them to proceed with the project.

Winlaton is the first place in the country to receive a hydrogen blend under the HyDeploy project. This is the second phase now and will cover 688 homes, some businesses, and a school, after all their gas appliances have been tested. The first phase covered about 30 commercial buildings and about 100 homes.

Appliances in the UK which use natural gas can handle up to 23 per cent hydrogen without any modifications. However, if the blend goes beyond that, problems may occur.

Previous trials have been successful and have been conducted in the Netherlands, Germany, and France.

To reach the net zero ambitions of the UK by 2050, the use of natural gas for heating needs to end. As a result, gas distributors face an existential crisis; they say they can only stay in business if they can provide 100 per cent clean hydrogen to businesses and homes.

On the other hand, multiple independent studies show that there are cheaper and more effective means of decarbonising domestic heating, like using electric heat pumps. These devices are up to six times more efficient than boilers that use hydrogen and cost half as much.

Other alternative sources of energy, such as wind and solar power, have seen a remarkable advancement. The Milan-based company, Energy Dome, have developed a CO2 battery that can store natural energy for a long time.

What’s more, the materials needed to build these batteries are readily available and used by manufacturers. This is why it is perceived that with the push of these batteries, energy rates would drastically be reduced.

Energy Dome has said that they have a round-trip efficiency of 75-80 per cent, which is higher than any other available storage technology. Some of these are compressed-air, liquid-air, and gravity-based solutions.

However, one thing to note is that developing the Energy Dome’s technology might not be the most affordable energy storage after they commercialise the device.

Save Energy in Many Aspects of Your Business

The need for energy supply will not decline any time soon. For this reason, many energy-supplying countries look at the problem from a different perspective in order to find new alternative sources. As they look for solutions to this problem, business owners can help by finding ways to conserve energy.

This is where Smarter Business enters the picture. We are a consulting company that can help you save on your business gas usage. We are experienced professionals who have worked and effectively helped companies save in different areas of their business.

Speak to us today for a quote on how much you can save. Call us on 01444 220060 or email us at info@smarterbusiness.co.uk.

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