UK electricity demand has fallen 5.6% so far in 2022 ahead of a winter of likely demand destruction due to astronomical energy costs and expected business failures, analysis of system operator data showed Sept. 7.
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Register NowPlatts assessed the price of month-ahead baseload UK power at GBP410.90/MWh ($472/MWh) on Sept. 6. The contract has averaged GBP241.08/MWh in 2022 to date, up 85% year on year.
An announcement from the government on support for energy bills was due Sept. 8, as warnings of business failures mounted.
Nearly 27,000 businesses with high energy use and turnover of more than GBP1 million/year were at risk of insolvency without substantial government support, according to Manchester-based insolvency firm Red Flag Alert.
"Every business is a high energy user when bills are at these levels," Red Flag Alert's Chief Economist Nicola Headlam told S&P Global Commodity Insights.
In all, some 76,000 otherwise healthy businesses "could slip into the negative in our credit ratings purely because of their exposure to high energy costs," Headlam said.
There were many smaller businesses in retail and hospitality that would also face failure due to increased energy costs, Headlam said.
"Red Flag Alert predicts that mitigating this decrease in profitability will cost GBP100 billion a year in business support."
Lower than lockdown
UK power demand for the eight months to end-August totaled 151.76 TWh, versus 160.79 TWh for the same period last year, National Grid data showed.
That was lower than the peak coronavirus lockdown year of 2020, when eight-month demand totaled 152.11 TWh.
According to Platts Analytics, UK monthly demand this year has been 5%-15% below the 2015-2019 five-year average.
Current forward wholesale prices and projected 2023 retail tariffs signaled further, deeper demand destruction that in itself would act as a significant weakening influence on prices, Platts Analytics head of European power analysis Glenn Rickson said.
"[Platts Analytics] forecasts a further 4% year on year decline in GB power demand in 2023 vs an already weak 2022," Rickson said.
UK power demand has been in gentle decline for many years, stretching back to the 2008 credit crunch and making it hard to pinpoint the impact of price versus weather, energy efficiency and industrial decline factors.
Annual UK demand of over 330 TWh in 2008 has fallen in recent years to below 250 TWh, and recent low of 237.41 TWh in 2020.
Support details imminent
During her first appearance as Prime Minister in the House of Commons Sept. 7, Liz Truss said she would announce a support package Sept. 8 for households currently facing an 80% increase in regulated energy tariffs from Oct. 1.
Truss said the package would not be supported by a windfall tax on oil and gas companies which, she said, would discourage investment.
One option reportedly under discussion is to cap household bills for 18 months at around GBP2,500/year for a typical user, at a cost which could be around GBP100 billion, the BBC reported.
The current cap -- set by energy regulator Ofgem -- is GBP1,971/year. It will rise to GBP3,549/year on Oct. 1 without government intervention.
The Department for Business, Energy and Industrial Strategy was not available to comment.
In late July the government announced non-repayable handouts of GBP400 off household energy bills from October, spread over six months.
The opposition Labour party has called for a freezing of bills at current rates for six months. That would cost around GBP29 billion, it said.
UK utilities have called for a tariff deficit over two years, freezing bills at current rates with consumers paying back the cumulative debt over the following 10 years or more.
Overseeing the detail of any support will be new Secretary of State for Business Jacob Rees-Mogg, who takes over at the Ministry for Business, Energy and Industrial Strategy from Kwasi Kwarteng, now Chancellor of the Exchequer (finance minister).
Graham Stuart, meanwhile, has been appointed Minister of State for Climate in BEIS. Alok Sharma has been re-appointed as COP26 President.