The State of the UK Energy Market in 2024

Wholesale energy prices have been on a rollercoaster ride in 2024.

The introduction of the Energy Price Guarantee (EPG) coincided with adjustments to the energy price cap post pandemic, which saw fluctuations in response to market dynamics. While there were temporary decreases in the price cap, the average bills for typical annual consumption remained substantially higher than pre-crisis levels.

In light of the ongoing challenges in the energy sector, Energy Secretary Claire Coutinho announced new reforms in electricity markets. These reforms aim to deliver potential savings of £45 annually for households and unlock £35 billion in savings over two decades.

Due to the current fluctuations in the energy market and cost of living crisis, many businesses are seeking ways to mitigate costs and improve efficiency, with a common strategy being to compare business energy prices before making any decisions.

UK Energy Market Remains Volatile

The UK energy market continues to experience volatility, influenced by factors such as the cost of living crisis, the war in Ukraine, and conflicts in the Middle East.

Nonetheless, the price cap is set to decrease by 12% to £1,690 in the second quarter of 2024, with further reductions anticipated in the second half of the year. Currently, the average price of gas stands at 7.4 pence per kilowatt hour (p/kWh), while electricity averages 28.6 p/kWh under the existing direct debit cap.

Despite the challenges, the UK's offshore energy sector holds significant potential for growth and innovation. With the right conditions, Britain could tap into a global export market valued at over £1 trillion in the next 15 years, creating job opportunities and bolstering the UK economy.

The UK's energy market has undergone significant turmoil in recent years, marked by fluctuating prices and government interventions. While measures such as the Energy Price Guarantee and price cap adjustments have provided some relief, challenges persist. Moving forward, continued reforms and investments in renewable energy and innovation will be crucial to ensuring a sustainable and resilient energy future for the UK.

Westminster has pledged its support for the construction of new gas power stations, aiming to ensure a consistent and dependable energy supply during periods of low renewable energy generation due to unfavorable weather conditions. The UK is the first major economy to have slashed its emissions by half since 1990. In comparison, the EU has achieved a 30% reduction, while the US has made minimal progress, and China's emissions have surged by 300%.

Will Energy Prices Go Down in 2024?

According to Ofgem, from 1 April to 30 June 2024, the energy price of a typical household that uses electricity and gas and pays by Direct Debit will decrease to £1,690 per year.

Ofgem's announcement of the price reduction comes as welcome news for consumers grappling with rising energy costs. The decrease in energy prices will provide much-needed relief to households across the country, particularly during a period of economic uncertainty. Additionally, the reduction in energy costs is expected to alleviate some of the financial burdens faced by families, allowing them to allocate resources to other essential expenses.

Furthermore, the decrease in energy prices reflects ongoing efforts by regulatory bodies to ensure fair and competitive pricing in the energy market. OFGEM's proactive measures aim to balance the needs of consumers with the stability of energy suppliers, fostering a sustainable and resilient energy sector.

While the reduction in energy prices is a positive development, it underscores the importance of continued monitoring and regulation to address underlying issues within the energy market. Efforts to promote transparency, competition, and innovation remain crucial in ensuring affordable and reliable energy access for all consumers.

Looking ahead, stakeholders will continue to closely monitor market trends and implement measures to support a robust and equitable energy landscape. By fostering collaboration between industry stakeholders and regulatory bodies, the UK can work towards a future where energy affordability and sustainability go hand in hand.