What’s happening to the UK energy industry?

5 April 2019

2018 was an unpredictable year for the energy industry. The capacity of renewable energy overtook fossil fuels for the first time. Fracking started at Preston New Road – then stopped, then started again. And a whole lot of energy companies went bust. Here’s what you need to know about the state of the UK energy industry.

Why are energy companies going bust?

Many of the smaller budget energy suppliers have simply been unable to keep up with the demand for low cost energy. And since January 2018, 13 UK energy suppliers have gone bust and ceased trading – affecting more than half a million customers.

Some of the suppliers who went out of business had been given poor customer service ratings on Citizens’ Advice, but some were just struggling to stay in business because their low prices left them unable to make a profit.

What is the energy price cap?

The energy price cap, otherwise known as the default tariff cap, is a limit on how much energy companies can charge for a standard variable tariff (SVT).

The cap has been set by the regulator Ofgem, in an attempt to increase competition within the energy market, and encourage customers to switch. The price cap came into force on 1 January 2019, and was fixed at a limit of £1,254 for standard variable tariffs from 1 April.

Why is Ecotricity exempt from the price cap?

When the price cap was introduced, Ofgem set out rules for energy companies to apply for exemption from the cap – this is known as derogation.

Ofgem agreed that Ecotricity shouldn’t be restricted by the price cap, because we’re investing the money from our customers’ bills into new sources of renewable energy.

We offer an ethical price promise, which means we charge one simple rate for each of our tariffs. And capping what we charge for our green energy would mean we wouldn’t be able to build and maintain sources of green energy, develop energy storage, or expand our electric vehicle charging network.

How long does Ecotricity have green derogation?

Our temporary derogation only applies until 1 September 2019, but we’re hoping Ofgem will reach a long term decision on how the price cap will apply to energy companies who are working to make Britain greener.

Our founder, Dale Vince explained: “We would have preferred this was done and dusted by now, but understand Ofgem has a lot on its plate.

“It should be straightforward, it affects a tiny proportion of the market, and it’s right that people should be able to choose a genuinely green supplier – the competitive market is, after all, meant to be about choice.”

The future of UK energy

Fracking

Fracking in the UK has never been more unpopular. Most of the British public are opposed to fracking, and anti-fracking campaigners have taken to the front lines at drilling sites in England to voice their frustration.

Despite the government’s investment in fracking over sustainable alternatives, extracted shale gas reserves have been lower than expected. And activity at Preston New Road has caused almost 50 earthquakes and tremors since work started last year.

Fracking isn’t sustainable, and we need to be looking to green alternatives. Public pressure and demand for green energy, coupled with the continued environmental impact of drilling, could mean the end of fracking in the UK.

Coal in the UK

Britain’s climate change targets call for us to move away from fossil fuels and switch to greener sources of energy. But while the government has vowed to remove all diesel vehicles from our roads by 2040, it’s failing to clean up the energy industry – giving the go ahead for a Cumbrian coal mine.

Despite this, coal production has been found to be around 75% more expensive than renewable energy – and a report by Energy Innovation predicts that wind and solar will out-compete the entire US coal system by 2025.

Renewable energy

In 2018, the capacity of green energy sources overtook that of fossil fuels in the UK for the first time ever. The capacity of fossil fuels has fallen by a third, whereas renewables have tripled in the last five years.

But the government still isn’t providing the funding for the UK to run only on green energy. The ban on onshore wind energy is still in place, and the Feed-in Tariff for home green energy generation has been scrapped.

Despite the challenges we face, solar power is breaking records in the UK and the EU climate change targets mean that green energy production is set to increase.

Battery storage

Battery storage allows excess energy to be stored when it’s readily available, so that it can be used another time. It’s particularly important when it comes to renewables – it means that when energy from the wind or sun is in abundance, it can be stored to be used when there isn’t as much available.

Battery storage is still a relatively niche market but, as the demand for green energy increases, so will our capacity to offer battery storage solutions for home energy generation and wide scale production.

 

Find out more about the future of UK energy in our guide to the top seven renewable energy trends for 2019.

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