Why high wholesale energy prices can be fatal

Highlights 

• Wholesale energy prices hit their second highest level since 2018 after the peak in mid-September.
• UK’s power grid moved towards gas-fired power plants and coal due to lack of power generation from wind.
• On Monday, 55% of the total electricity needs were met by gas-fired power plants, which is generally 40%.

Amid the ongoing struggle to get electricity and gas at competitive rates, the burden on suppliers is further increasing with the wholesale energy prices hitting their second highest level in the last three years. Mainly due to the low speed of wind, the wholesale energy prices were pushed up to more than £2,000 per megawatt hour on Monday, and since 2018, this is only the second time that the price has exceeded this limit.

The energy price crisis, which started in August, was further aggravated as the lack of power generation from wind put pressure on the UK’s power grid to move towards gas-fired power plants and coal. Monday’s price hike was still less than the £2,500 per MWh price level hit in mid-September, which forced several energy suppliers to go bust. With a rough winter ahead, rising energy prices are hitting poor households the hardest. The energy crisis could further be worsened due to Western Europe receiving lower supplies from Russia.

On Monday, 55% of the total electricity needs were met by gas-fired power plants, which is generally 40%, while the coal sector contributed around 3%. According to Drax Electric Insights website’s data, just 4% of the total electricity needs were met by wind farms, which is a just small portion of the 21% supplied over the last year.

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Here are some of the UK energy suppliers which may be impacted by these developments.

Royal Dutch Shell Plc (LON: RDSA)

Royal Dutch Shell Plc, well known as Shell, is a global oil and gas company with a current market cap of £68,753.18 million. It gave a return of 45.98% in 1 year. Royal Dutch Shell Plc’s shares were trading at GBX £1,700.80 at 7.30 AM on 17 November 2021 (GMT).

BP plc (LON: BP)

London-headquartered BP plc’s current market cap stands at £67,833.18 million and it has given a return of 47.19% in 1 year. BP plc’s shares were trading at GBX 344.55 at 7.30 AM on 17 November 2021 (GMT).

Ceres Power Holdings plc (LON: CWR)

Ceres Power Holdings plc is a major producer of fuel cell technology that is aimed at solving climate change challenges. The current market cap of the AIM-listed company stands at £2,227.74 million and it has given a return of 56.03% in 1 year. Ceres Power Holdings plc’s shares were trading at GBX 1,177.00 at 7.30 AM on 17 November 2021 (GMT).

RELATED READ: 5 best renewable energy stocks to buy in the final quarter of 2021

ITM Power Plc (LON: ITM)

ITM Power Plc provides energy storage and clean fuel solutions to its clients in a bid to boost the use of renewable energy. The current market cap of the AIM-listed company stands at £2,227.74 million, and it has given a return of 55.53% in 1 year. ITM Power Plc’s shares were trading at GBX 491.80 at 7.30 AM on 17 November 2021 (GMT).

TotalEnergies SE (LON: TTE)

TotalEnergies SE is a France-based global integrated oil supermajor. The current market cap of the LSE-listed company stands at £97,035.11 million, and it has given a return of 35.45% in 1 year. TotalEnergies SE’s shares were trading at GBX 46.38 at 7.30 AM on 17 November 2021 (GMT).