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Looking Ahead at Energy in 2022

British businesses have endured an eventful and worrying 2021, with rapid gas energy price rises putting severe pressure on many as their overheads increased. Many will be hoping that the picture for 2022 will be more positive, and that prices will begin to stabilise and decrease.

The only real constant in the energy market is its volatility, but as it stands the current demand and supply picture suggests that prices won’t be dropping any time soon. Here, Powerstar looks at the various factors impacting on the energy market, and how things might play out over the next year.

Gas Prices

Markets have been tight across the board for energy-related commodities, and that looks to continue into 2022. Global oil supply does look like it will stabilise in the second quarter of next year, likely bringing some bearish influence on global gas prices. Europe, and in particular the UK, however, are unlikely to see much of that benefit.

Gazprom, Russia’s state-owned gas giant, has already warned that it forecasts gas prices to remain at the highs seen in 2021 through the next year. Storage in Western Europe is substantially depleted compared to the six-year average, and will take at least a year for markets to return to some semblance of normality. The world’s largest gas producer is already benefiting from the situation, posting record earnings for the third quarter of 2021 with an expectation of even higher profits for the final months of the year. If Europe experiences a particularly harsh winter this situation could spiral yet further, particularly as Russia continues to pressure Europe over the controversial Nord Stream 2 pipeline.

Energy Prices

Analysts at Cornwall Insight have already warned that energy bills could rise by as much as 30% in 2022. Much of that potential increase will likely come during the first quarter of 2022, before wholesale power prices return to some semblance of normality at some point. However, judging when that point will be is difficult, and for energy supplies and businesses alike that are grappling with mounting energy costs, it will be a worrying wait.

The domestic price cap is already at a record high, set at £1,277 from October, and is likely to increase significantly in the spring if the energy crisis continues. Some in the industry, including green energy specialist Ecotricity, are calling for a similar price cap to protect businesses, which would provide at least some degree of certainty.

Green Energy

Despite a disappointing conclusion to COP26 that failed to secure an outright phase out of coal power, we can expect to see rapid growth in renewable energy in 2022, both in the UK and abroad. For the UK, much of that focus at grid scale will continue to be on offshore wind. The UK is the world leader in terms of installed offshore wind, and only narrowly behind China as the country with the most additional capacity in the pipeline (63.2 GW vs 64.4GW).

Rooftop solar in the UK is expected to exceed 500MW during 2022, while ground-mounted solar will also continue to grow. Many of these will be deployed alongside battery storage, with a report from Solar Media forecasting a huge jump from 1.3GW of installed battery storage in 2021 to 4.5GW by the end of 2022. Beyond that, additional projects in the pipeline total 16.5GW across 686 individual sites.

Flexibility and Resilience

This battery storage pipeline will play a key role in overcoming one of the major difficulties presented by the transition from fossil fuel generation to renewable energy. The inflexible nature of wind and solar makes balancing supply and demand increasingly difficult. However, battery storage makes up one of a growing range of balancing services that it is hoped will be used to dynamically balance supply and demand. This includes energy-intensive businesses reducing the amount of power they draw from the grid to balance spikes in demand, known as demand side response, or dynamic containment which National Grid hope will reduce the inertia and losses in the current grid by more rapidly correcting system imbalances.

The rollout of battery storage and other balancing services should see the UK as a whole gradually move away from the current picture, which leaves a very real possibility of widespread power disruption, particularly during the winter months. Find out more about protecting your business from power disruption here.

For the many businesses that are worried about the impact that further energy price rises will have on their finances, voltage regulation provides a way to secure significant savings on your energy bills. This technology allows your entire site to consume less electricity, without disrupting your operations or efficiency. In fact, lower and better-quality voltages being supplied to your site infrastructure can further the lifespan and reduce the repair requirements of sensitive equipment, whilst simultaneously reducing your energy bills and carbon emissions.