Shifting Currents: Understanding the Evolving Energy Market

Energy BuyingEnergy News 2nd October 2024

The energy market in the UK is a big topic of conversation and it affects us all. As a business owner it’s a good idea to have some knowledge on how the energy market works, as you will then understand the effects it can have on pricing when it comes to your energy bills. We will talk you through the basics of the what’s, why’s and how’s of the evolving energy market in the UK.

The beginning of the Energy Market

Like how everything else is made, the energy market started from scratch. In its early developments, a lot of notable things happened.

18th Century
● The Industrial Revolution happened and coal was the main source of how they get energy for things. The late 18th Century was also when the invention of the coal-powered steam engine was made.

19th Century
● The first step towards solar power was noted when the photovoltaic effect was first introduced.
● In 1881, the world’s first public electricity supply using hydroelectric power for street lighting happened.
● The first electricity-generating windmill was created by Professor James Blyth.

20th Century
● The Central Electricity Board (CEB) is formed.
● After World War II, there was a significant expansion in energy infrastructure and the first commercial nuclear power station called Calder Hall.
● Solar photovoltaic (PV) technology has started its use.
● Wind farms were completed and used in 1991.
● Because of the 1989 Electricity Act, the National Grid is born that privatises the electricity industry.

21st Century
● More electricity-generated zero-carbon sources were noted to be used more than fossil fuels in 2019.
● 2020 has been Britain’s greenest year on record being able to generate almost 68 days without using coal.
● The UK produces its trillionth kWh of electricity from renewable sources in 2023.

The energy market operates as an oligopoly, a market structure in which a few companies hold substantial influence over the industry and collectively dominate the market. The term “oligopoly” means that a limited number of major players, including various energy sources such as electricity, gas, and wind, coordinate with each other contributing to being able to shape the current energy market.

Nowadays, we all know about the many energy sources we enjoy using, however in the beginning, only the sun and wind were the most reliable forms of energy. Now we use the sun and wind with the help of technological advancements.

Challenges in the Energy Supply

Of course, there is no perfect timeline for the improvement and success of an industry. This is nothing new to the Energy Market. As for all the ups and downs that we have seen in the energy industry, here are a few of the challenges that people are seeing today.

Unpredictable Energy Prices

Compared to before, consumers are left trying to pay higher prices for energy after the global pandemic in 2020. After the restrictions were lifted there had been a rising energy demand that posed a great challenge for energy producers and consumers alike.

No Competition

Suppliers function in a competitive market where they determine their prices, and consumers choose suppliers based on cost and service quality. However, with the rising wholesale energy prices, most suppliers end up pricing energy close to the highest allowable rate. This situation gives very little motivation for consumers to switch suppliers to save money which then hinders the competition in the market.

Grid Security

For one of the oldest electrical grids in the world, the UK’s centralised power transmission network can be vulnerable to cyber-attacks and virtual threats. However, with the continued growth in technology, the UK has managed to build a secure electricity grid. The real war is at the existing electricity grid and how it cannot accommodate the variability and intermittency of renewable energy sources.

Wind and solar power have grown a lot lately, but the current electricity grid isn’t built to handle their ups and downs. This can lead to problems like overloading the grid when there’s too much renewable energy and too little energy when needed. To fix this, we must invest heavily in updating the grid and technology so we can match energy supply with demand.

Finance

Finance is another major challenge facing the UK’s renewable energy sector. This is important, especially for large-scale projects. It is particularly hard for new technologies as upfront investment is still needed although we are in a time where renewable energy technologies have become more economically priced.

Future Opportunities of the Energy Market

Now, let’s talk about what is in store for us in the energy market in the future.

There is only one remaining Coal Plant in the UK which will stop its energy production on Monday 7th October 2024. This means that the UK is giving way to other renewable energy sources like solar, wind, and hydro. This is great news for the net zero future that we are aiming to attain in 2050.

Another great news for the goal of a net zero future is that the Great Grid Upgrade was launched. This is the largest overhaul of the electricity grid in generations. This infrastructure project enables more energy connected to homes across England and Wales.

With the introduction of new technologies and evolving policies, the future of energy holds great promise. After all, The UK energy market is ever-changing and continually developing ways to reduce carbon footprint.

Now, if you want to start with reducing your carbon footprint, how about knowing which energy provider might be the best one for you? Get in touch with our team to find out.