This article instead looks at a retrospective of the last quarter, focusing on the data and what can be done to mitigate costs.
Energy Supply
To understand why the UK energy market is so volatile, it’s helpful to look at our energy supply. An overview of the electricity mix is shown below:
Very little has changed between Q2 and Q3 for the energy mix: 1% more renewable generation and 2% less import. However, Gas prices have spiked considerably, with a 24% increase, causing electricity price to follow suit.
Solar PV and wind turbine production remained consistently strong at 12% and 23% of supply respectively.
Pricing
There were several factors affecting gas prices through the quarter, including Norwegian pipeline maintenance and ongoing conflict in both Ukraine and the middle east. As well as these drivers, the winter season is approaching and gas storage volumes are low, around 50% in medium range and 0% in long range stores.
Although the low storage volumes are a concern, the larger picture is that our total storage volumes are not big enough to make a significant impact. At most, our storage can supply around 5% of the total annual demand, or around two weeks of winter demand. Half of this storage can be emptied quickly, which can help to mitigate short-term extreme price spikes, but the longevity is not enough to help with any prolonged seasonal prices.
Below is a frequency distribution of the intraday electricity price in Q3 2026:
There is a clear trend upwards in electricity pricing through the quarter, with average pricing increasing between July to August by 20%, then a further 4.5% in September. September did see a widening of the distribution, with a good number of low-cost hours. There are 600 instances under £60/MWh with 341 instances over £200/MWh.
Prices peaked at £600/MWh on the intra-day market, and £135/MWh on the day-ahead. Although it’s not always cheaper, day-ahead pricing can help to reduce risk during volatile periods.
More detailed electricity and gas price tracking is shown below:
There was a slow consistent trend upwards in pricing, with two notable drops near the beginning and end of September. Gas began to trend down after rising consistently through August, but the quarter still ended around 50% higher than it started, still before winter demand has ramped up.
What does this mean?
Although gas is trending upwards at quite an alarming rate, consistently high electricity costs still represent a good opportunity for Combined Heat and Power operators. It may be a good time to secure some gas volume to do winter export trades.
For those without self-generation, there is much less opportunity. Focusing on energy efficiency and ensuring energy is not wasted or used unnecessarily through the season is important to mitigate the cost increases. As well, it is worth ensuring your contract is good and exploring Power Purchase Agreements (PPA) with generators for a consistent and lower-than-market pricing.
Reducing reliance on grid power is the best way to mitigate a volatile market. Energy efficiency, self-generation, and alternative heat sources are all opportunities to consider.
You will find regular blogs outlining the direction of the energy market and drivers behind those trends on the NFU Energy website, see September update here: September energy market update | NFU Energy.
If you want some advice on your contract, trading, or further consultancy on how to reduce your costs, contact us at growsave@nfuenergy.co.uk.
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