Many people across the UK aren’t quite sure how the energy market works. In most cases, energy companies aren’t actually generating the energy themselves. Though there are some exceptions to this, and brands like Octopus are launching their Renewables investment to generate more energy themselves, generally they buy it up from energy generators.
Historically, most of this energy has been made up from the burning of fossil fuels. But we’ve seen in recent years an increasing demand for completely renewable energy, so companies like Bulb have committed to using 100% renewable electricity (check our review of Bulb out for more info). This means that the energy generation is largely made up of wind power, but there’s also a decent amount of solar and hydro generation too.
However, this still doesn’t answer the question – what’s the current wholesale electricity price in the UK? Well although it varies, that’s what we’re going to be answering.
What is the wholesale electricity price?
If we’re talking about the current wholesale price of electricity in the UK, the cost is approximately £45 per mWh. Bear in mind that this is equal to a thousand kilowatts, so if we look at it on a kilowatt basis, the price is 4.5 pence for every kilowatt.
And when we look at the average energy prices that companies are charging in the UK at the moment, it’s steadily creeped up across the course of the year. As of 2021, it’s between 18 and 22 pence per kWh, so somewhere around 4 times what the energy company is paying for it. That may lead you to think that they’re making a massive profit margin.
Of course, this is a bit unfair as it doesn’t factor in all the things that the energy company has to do between getting the energy company to you, paying their staff and a whole host of other expenses. Although we’ve seen energy prices go up in recent years, smaller companies coming into the market has definitely helped avoid a drastic increase from the monopoly at the top.
How much have prices increased since 2020?
The simple answer is that for the consumer quite a lot, more than many people would have liked! But this is reflected in the increase of wholesale electricity, which has more than doubled as of July 2021 according to Utility Helpline;
As you can see, they’ve had a pretty steep increase in prices recently, which is reflected in the amount we’re expected to pay each month. This is pretty bad timing considering recent circumstances, but generally suppliers have kept all of the other costs around the same price; network costs and operating costs are the same.
Even though we’re using more and more renewable energy, many suppliers are still using fossil fuels like coal as a source of energy too. And when the price of these rises across the market, then eventually we end up footing the bill at the end of the supply chain. It’s not ideal, but there’s not much the energy supplier can do about it unfortunately as they’re essentially a middle man.
In conclusion, the wholesale energy price has increased a whole lot over the past decade, and unfortunately, at the present many independent firms are predicting that it’ll keep climbing up in cost.
This is going to be unaffordable for millions of people across the UK, just at a time when the government seem to be cutting down the amount of support they offer. Although it sucks, being conservative with your energy is the only real thing we can do about it at the moment (or move to Bulgaria, where there energy costs are around half of ours!).