Gas price increase: explanation & tips

La hausse du prix du gaz en 2022

 

In recent months, energy prices have been at an all-time high due to tensions with Russia. Both companies and individuals alike are feeling the heat of this price increase, fearful of extra-high energy bills at the end of the month. So, what is the reason for this sudden increase in gas and electricity prices? How can you save energy at home? Netatmo takes a closer look.

 

Why are we talking about the gas price increase?

Gas price increases are not a new issue. Well before the war in Ukraine, the UK had already experienced several temporary gas price increases. Gas and energy prices are highly volatile because they are influenced by both supply vs demand and political decisions.

For example, the 2017 major economic crisis in Venezuela, one of the world’s major oil exporters, drastically increased the global cost of gas.

Additionally, with wholesale costs ballooning over the past year, many smaller UK energy companies – that typically offered competitive prices – went out of business, leaving millions of customers with colossal rises to their energy bills.

The UK’s overdependence on gas (85% of homes) is also a contributor to higher gas price increases than other countries across the EU.

In short, the increase in natural gas prices over the past few years is a result of multiple factors. While there was a slight decrease in March 2021, gas tariffs have continued to rise since then. The impacts of the war in Ukraine and political tensions between Russia and the world are clear: rising gas prices are here to stay in the current economic climate.

 

What is the situation in 2022?

Since the Ukraine war, along with many other countries, the UK has imposed a number of sanctions against Russia, including sanctions on major Russian banks and restriction of entry into the UK for certain Russian Officials and Ministers etc. In response, Russia has imposed sanctions of its own, including slowing down its gas shipments to the EU, which pushed the global price of energy even higher.

Russian company Gazprom has announced a drastic reduction in its gas exports to the EU, notably via the Nord Stream pipeline, which will only export at 20% of its maximum capacity. While the UK produces about half of its gas, it is not protected from global increases, and now sees higher energy prices than in comparable economies like France and Italy.

In light of the recent increase in the cost of wholesale gas, the Government announced the Energy Price Guarantee and “price cap” schemes to help protect consumers. In addition, the UK Government is trying to secure long-term supplies of liquefied natural gas (LNG) to help tackle high energy prices.

While the energy situation may seem tense ahead of the upcoming winter season, all is not lost because as a geopolitical issue, there are disadvantages for Russia too.

 

What impact will the gas price increase have on households?

Gas price increase: explanation & tips

 

In the UK, more and more households are beginning to worry about the energy situation and its impact on their upcoming bills. Monthly increases in both gas and electricity prices in April 2022 alone were by far the largest ever recorded on a series dating back to 1988.

On 8 September 2022, the Prime Minister announced that the new Energy Price Guarantee (EPG)  would replace the price cap from 1 October. The EPG will last for two years and remain at the same level throughout, capping unit costs in the same way the price cap did. Under the EPG, the average annual gas and electricity bill for direct debit customers with ‘typical’ levels of consumption is £2,500.

Households will also receive the £400 Energy Bills Support Scheme (EBSS) payment which covers the period 1 October 2022 to 31 March 2023.

 

What about regulated gas tariffs?

In the UK, Ofgem is the official independent body for regulating gas and electricity prices. Ofgem ensures gas suppliers comply with strict environmental goals, provide adequate customer service and offer competitive prices for their gas supply.

Ofgem takes action on price controls and defends consumer interests to keep the price of gas affordable. Then, gas pricing largely falls to energy supply companies themselves. If you want to change your tariff setup or switch gas suppliers, you’ll first need to know who’s currently supplying your gas. In the UK, you can find out who supplies your gas by checking the supplier details on a recent bill for your home.

 

Tips for managing rising gas prices

Although it seems we’ll be living with increased gas prices for some time to come, there are solutions to limit your energy output and avoid that dreaded bill at the end of the month. Follow a few simple steps to keep your energy consumption at bay or even reduce it.

Check your heating and cooking appliances

Gas boiler: In the UK, it is vital that all gas appliances are regularly checked by a professional (mandatory annually for landlords). Regular maintenance can prevent gas leaks and stop carbon monoxide being released. Having your gas boiler checked is also important because it allows you to monitor its energy consumption. You many choose to change your boiler if you feel it is consuming too much.

Cooking appliances: Although annual maintenance of your cooking appliances is not mandatory, make sure you check them regularly to limit unnecessary energy costs. For example, if your gas hobs are out of order, you’ll have lower energy efficiency. A good clean can also go a long way! Nevertheless, if you have any doubts or malfunctions, you should always call a professional.

 

Use a connected thermostat to save energy

To keep your home at ideal temperature, a connected thermostat is your best ally. The Netatmo Smart Thermostat lets you create your own heating schedule and allows you to control the temperature remotely, wherever you may be. Thanks to its AutoAdapt feature, the Netatmo Smart Thermostat auto-modulates to provide the ideal temperature.

Using a programmable thermostat not only manages your indoor temperature but also helps reduce your energy consumption. According to ADEME, the use of a programmable thermostat could save you 15% on your heating bill.

Can lowering your heating by 1 degree save you energy?

Lowering your heating by 1 degree could also save you up to 7%* of energy, according to ADEME. It’s also more eco-friendly: this energy saving equals 42 kilos less CO2 released into the atmosphere per year per person.

 

What about the increase in electricity prices?

Like gas prices, electricity prices are also taking a toll. According to official figures, average UK electricity prices per kwh were 18.9 p/kWh for 2021, but at the end of 2022 could be up to 34.0p/kWh.

It’s not just the UK suffering from higher energy prices. In addition to the Russian invasion of Ukraine, there are a number of factors at play:

Increased demand: the post-pandemic economic recovery resulted in increased energy demand.

Operational issues: halted maintenance, supply issues and project delays as a result of the pandemic.

Weather: droughts in Brazil and a less-windy Summer than usual in Europe led to less renewable energy storage. Simultaneously, a hot summer in Asia and cold winter in Europe led to increased energy consumption.

Gazprom: the Russian gas giant lowered their supply to European sites.

In addition to all these variables, rates can also vary according to how you pay (direct debit, prepayment, credit based etc.). Nonetheless, UK households will have to keep a close eye on their electricity consumption this winter!

 

*Source: Why switch to a programmable thermostat? Up to 15% off your heating bill per year, compared to an installation that is permanently regulated at comfort temperature.

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