Navigating the UK energy sector in 2022

Last year was a tumultuous time for the UK energy sector. In some cases, this is set to continue, especially with continued uncertainty with gas supply issues.

On the brighter side, upcoming technology and regulation changes should create the opportunity for consumers to make choices that go towards further decarbonising their energy use.

COSTS CLIMB

A handful of retailers exited the UK market in 2021, and 2022 is shaping up to potentially be similar. With the exit of Together Energy Retail, the UK’s energy sector is now down another B2C supplier.

Together with its subsidiary Bristol Energy, Together Energy supplied around 176,000 domestic customers, and one non-domestic customer. As a result of failed suppliers, the expected cost for consumers is £3.2 billion or around £120 on everyone’s bills per year.

Another impact on consumer bills is due in April after the new price cap was recently announced to be £1,971. This is a considerable increase to the standing cap of £1,277 per annum for an average consumption household paying for a dual fuel tariff by direct debit.

Removing VAT and policy costs, as suggested by experts, could remove £90 and £190 respectively from the average household bill. Many of our European neighbours have done this already.

BILLING

Record-high market prices in the final quarter of last year mean consumers are also due a £157m windfall from renewable energy generators, according to official figures.

The Low Carbon Contracts Company (LCCC) - responsible for managing renewable energy payments - has forecast paybacks could increase to a total of around £750m by the end of winter. This averages out to £27 from every annual home energy bill.

A decision is also expected from the UK government this year on moving electricity bill levies onto gas to address the imbalance of the high cost of electricity against gas.

TECHNOLOGY BACKING CONSUMERS

Consumers could be in for more cost savings once the full potential of smart systems and flexibility in the UK energy sector is unleashed. This includes the potential for wider uptake of Virtual Power Plants (VPPs), solar and EV technology.

Costs of managing the system are expected to reduce by up to £10 billion a year by 2050, as well as generate up to 10,000 jobs for system installers, electricians, data scientists and engineers. 

A further 14,000 jobs could also be created by the export potential of these new technologies. Estimates suggest this export market could be worth as much as £2.7 billion a year to the UK economy by the middle of the century.

For consumers, the benefits range from households being able to trade back their excess energy to reduce bills, through to knowing when the costs of running household appliances like washing machines and dishwashers are at their lowest. 

Flux has already worked with retailers in other markets to make these options possible to their customers. Our software enables the adoption of smart technologies to help track and monitor consumption for residential customers and businesses. Our Flexibill product also enables Export, VPP and EV technology for our clients.

THE GENERATION GAME

A 20% mix of hydrogen is slated to be added to the UK’s gas grid in 2023. This is estimated to remove close to 7% of the CO2 emissions from a purely natural gas grid due to the lower calorific value of hydrogen.

Nuclear energy will be used to make this mix possible - by providing power to the grid during periods of high demand and co-generating hydrogen in off-peak times. This approach is expected to lead to further growth in the UK’s nuclear sector.

Empowering retailers to be more sustainable and prepared for a decarbonised energy future is what Flux does. Our products give energy businesses a competitive edge by responding faster and more dynamically to their customers’ needs.

Wondering how your business can prepare for all these changes? Get in touch with Flux to find out about the different solutions we offer to make the energy future a reality.