Wholesale Gas Prices UK: The Ultimate Guide
While wholesale gas prices fluctuate, they don’t directly impact your household energy bills. The price you pay for gas is determined by your chosen energy supplier and the specific tariff you’re on.
If you would like to read more information or learn more about the pricing of business energy, you can do so here .
What Is Wholesale Energy?
Wholesale energy refers to electricity or gas acquired in large quantities for resale with a profit margin. Energy suppliers procure wholesale energy from producers and subsequently apply fees to cover the expenses of delivering energy to consumers, whether in the form of domestic or commercial usage.
Additionally, entities involved in wholesale energy purchasing encompass financial intermediaries, energy traders, and significant energy consumers like multinational corporations.
Who Provides Wholesale Energy in the UK?
The UK’s electricity and gas sector comprises a diverse array of providers responsible for generating electricity and sourcing gas, which is subsequently distributed to end-users in both domestic and commercial sectors.
However, approximately ten companies dominate the generation of about three-quarters of the UK’s electricity, distributing it across the GB National Transmission System. Below is a table (sourced from Ofgem ) depicting their market shares, although it excludes electricity imported from foreign sources:
Company
Market Share
EDF
18.29
RWE
16.57
SSE
7.83
Orsted
6.26
EPH
4.98
4.64
Uniper
4.58
Scottish Power
4.07
Drax
3.54
Triton Power
1.93
Others
19.1
How Have Wholesale Gas Prices Changed Over Time?
In late 2021, energy prices surged rapidly due to the energy crisis triggered by increased demand and geopolitical tensions. The winter of 2021 witnessed heightened demand across Europe, exacerbated by reduced gas imports from Russia due to geopolitical conflicts, notably Russia’s invasion of Ukraine.
As a result, wholesale energy prices soared to 50p per kWh for electricity and 60p per kWh for gas. It took the entirety of 2022 for these prices to gradually ease. By 2023, the market experienced significant stabilisation attributed to reduced summer demand and efforts to address supply issues.
Forecasts by Cornwall Insights indicate a projected decline of approximately £270 or 14% in Q2 of 2024, with further expected reductions throughout the year. However, uncertainties surrounding price cap forecasts mean there is no definitive guarantee of substantial price decreases later in 2024.
According to data from https://tradingeconomics.com/commodity/uk-natural-gas , UK Natural Gas has experienced a decrease of 10.36 GBp/Thm or 12.84% since the beginning of 2024 (as of March 5, 2024). This indicates a downward trend in wholesale gas prices compared to earlier in 2023.
How Does This Market Affect My Energy Prices?
Fluctuations in the wholesale energy market can directly impact your energy bills, contingent upon the type of tariff you’ve chosen. Variable rate tariffs are susceptible to changes in wholesale prices, potentially leading to price hikes if the market becomes less competitive.
On the other hand, fixed-rate tariffs remain unaffected by wholesale fluctuations, as your unit rate remains locked in for the contract’s duration. Wholesale energy prices typically constitute nearly half of your bill. Here’s a breakdown of how your energy bill is calculated:
Wholesale price (42%): Covers the bulk cost of energy procurement.
Distribution (16%) : Charges incurred for transporting energy to your property.
Taxes (24%) : Taxes levied on non-sustainable energy sources, contributing to a significant portion of the bill.
Operating costs (11%): Allocated towards supplier operational expenses, including staff salaries and technological investments.
Profits (7%): Represents the supplier’s profit margin generated from selling energy tariffs.
What Factors Affect Wholesale Energy Prices in the UK?
Energy prices, like other commodities, are subject to the dynamics of supply and demand. Suppliers often purchase energy in advance at varying prices, a practice known as hedging. Hedging helps mitigate price fluctuations and shields consumers from sudden spikes in energy bills. Several factors contribute to changes in wholesale energy prices:
Best Energy Suppliers in the UK
Company
Fewer Complaints
Easy to Switch
Clear Bills
Easy to Contact
3
5
4
3.2
3.65
2
5
4
4
3.5
3
Not scored
5
3.2
3.35
3
4
4
2
3.25
3
4
4
2
3.25
2
5
4
3.4
3.15
1
5
5
3.2
3.15
1
5
5
2.8
2.85
1
5
4
3.2
2.75
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