Energy price cap could hit over £2,900 a year

Last week UK wholesale gas prices hit as high as £4.50 per therm, with Russia’s invasion of Ukraine catapulting the price of gas and oil upwards. This has led to energy market analyst Cornwall Insight predicting the cap will rise in October to more than £2,900 a year for an average user. 

The firm says the price cap has been extremely volatile recently, with the price cap predictions rising by nearly £400 for the winter since 23 February. The company’s researchers are now also seeing the summer cap predictions coming in at more than £2,000 for the first time. 

Commenting on the news, Dr Craig Lowrey, a senior consultant at Cornwall Insight, said: “With the response of countries and companies to the actions of Russia changing almost hourly, there is no doubt these peaks and troughs are set to continue at least in the short-term. 

“The UK government will need to be ready with ways to mitigate the impact on consumers, with an increase in financial support to households likely to be a necessity, in addition to renewed considerations on support to business customers. In the longer term, the UK and other governments across Europe will need to weigh up their options for future gas supply. 

“It is likely that many will look to fast-track their renewable projects and balance their reliance on imports from Russia and potentially other nations, to avoid unstable international geopolitical situations continuing to destabilise their energy prices.” 

Cornwall Insight’s research comes just a week after financial services company Investec made similar predictions for the price cap in October 2022, driven by the current conflict. 

It’s expected wholegas prices will remain high for months, as Russia is the world’s largest exporter of natural gas. 

In addition to this, research from think tank the Energy and Climate Intelligence Unit (ECIU) said the UK could spend £6.3m per day on Russian gas. This is despite the fact that, based on 2021 figures, the UK imports six to seven percent of its gas from Russia - covering about four percent of overall UK gas demand. 

Based on the price of wholesale gas on 3 March of 200p a therm, the UK would spend £2.3bn on Russian gas a year, if it continues to import that amount of gas from Russia. 

Commenting on the research, the ECIU’s head of analysis Dr Simon Cran-McGreehin said: “Although not at the same level of some other European countries, the UK has been spending billions of pounds on Russian gas that could now be being used to fund Putin’s war in Ukraine.

“This is another reason why the UK needs to break its dependency on gas and insulating our homes, deploying electric heat pumps and shifting from gas power stations to renewables is the way to do it.”

Supporting those hit by energy price increases will be high on the agenda on the Utilities & Telecoms stage at this year’s Credit Summit. To find out more about the event, click here.