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UK News

Why is a rise in gas prices pushing up electricity costs? Energy crisis in four charts


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Wholesale prices for gas are soaring and there are fears many energy suppliers in the UK could go under.

The cost of gas for suppliers has increased by 250% since the start of the year with a 50% rise just since August, data shows.

Despite the spike in costs for the companies, consumers are protected by the energy price cap.

But this puts pressure on suppliers as they cannot pass on the increase in wholesale gas prices to customers.

The rise in costs has been put down to a number of factors, including a cold winter earlier this year which left gas stocks depleted as well as refineries in the US being shut down by Category 4 Hurricane Ida, according to industry analysts.

High demand for liquefied natural gas from Asia and a drop in supplies from Russia have also contributed to the price rise.

Gas sourced from the UK continental shelf made up nearly a quarter of the UK’s supply for the first three months of this year. That means, more than two thirds of natural gas demand had to be met by imports, exposing Britain to global energy price swings.

Higher gas prices have also pushed up electricity prices because Britain generates around a third of its electricity from burning natural gas.

Power supplies have become even more constrained than usual after a blaze at the electricity interconnector at Sellindge shut down the undersea power link with France.

The National Grid has warned it will be more than six months before the facility can be restored, adding more pressure on natural gas supplies used for generating electricity.

The mismatch between supply and demand and the ensuing rise in costs for suppliers means four firms have already gone bust and there are fears that others could follow suit.

Data from the energy regulator Ofgem shows that the number of energy providers in the UK has declined by a third since mid-2018.

Energy company Bulb, which has 1.7m customers, confirmed today it is seeking a bailout to stay afloat after British Gas agreed to take on 350,000 customers from People’s Energy, one of two smaller suppliers which collapsed last week.

Despite the crisis in the energy market, the government says the UK “benefits from having a diverse range of gas supply sources” and gas production in Norway will “significantly increase” from 1 October to support UK and European demand.

Business Secretary Kwasi Kwarteng told the House of Commons: ”We have sufficient capacity, and more than sufficient capacity, to meet demand and we do not expect supply emergencies to occur this winter.

“There’s absolutely no question of the lights going out or people being unable to heat their homes.

“There’ll be no three-day working weeks or a throwback to the 1970s. Such thinking is alarmist, unhelpful and completely misguided.”

The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.

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© Sky News 2021

Written by: Rother Radio News

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