How will summer energy prices affect your business?

13th Jun 2023 | Mollie Pinnington | 4 minute read

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The summer months can bring significant increases in energy prices for businesses across the country. With rising temperatures come more frequent and intense air conditioning use, leading to an increased demand for electricity and higher energy costs. Businesses that are located in areas with particularly hot climates can see even larger increases in their bills than those in cooler regions. Additionally, during the summer, certain energy sources such as coal and natural gas can become more expensive due to higher demand. These costs can add up quickly for businesses, so it is important that business owners plan for these price increases.

In the summer months, energy suppliers typically find it more difficult to balance the market due to increased demand in energy-intensive activities. As a result, wholesale energy prices can go up significantly. This can have an especially large impact on businesses, who are exposed to these increased prices when they purchase energy from their supplier. In addition, businesses may find that their own electricity prices also go up. These price increases can be especially difficult to manage for small companies with limited energy budgets.

Energy prices this summer

In August last year, energy prices in the UK went through a period of extreme volatility due to geopolitical factors. As tensions between Russia and Ukraine, Russia lowered their gas output to other countries, driving up prices. This rapid increase in cost had a direct impact on businesses that rely on energy for their operations.

The summer months were particularly tough, with energy prices hitting their highest levels. This created significant challenges for businesses as the increased costs had to be absorbed by management or passed onto customers. Businesses that were not prepared with adequate budgeting or other strategies saw a large dip in profitability due to the unanticipated price increases.

Fortunately, this year’s summer energy prices have been more predictable and relatively level. Although there are still some risks that could cause rapid price increases, these risks are within normal ranges for this time of year. This means that businesses should be able to plan ahead and prepare a budget for their energy costs without having to worry too much about unpredictable spikes in prices.


Being aware of price increases

Despite the relatively stable energy prices this summer, businesses should not expect them to stay at this level. As temperatures start to cool and demand for energy-intensive activities decreases, energy suppliers will likely start to increase their prices. This is because, during periods of low demand, suppliers have more capacity to raise their prices in order to make up for lost revenue.

It is important for businesses to keep a close eye on energy price trends and be prepared for potential price increases in the future. Business owners should also evaluate their current energy contracts to ensure that they are getting the best deal possible. This could involve looking into renewable energy sources, switching suppliers or even negotiating better rates with existing suppliers.


Why prices are still higher than pre-covid?

The pandemic has had a profound effect on the global economy, and energy markets have been no exception. Demand for electricity and natural gas dropped significantly as countries imposed lockdown restrictions, resulting in lower demand for all types of energy sources. In response, energy suppliers reduced their prices in order to remain competitive and make up for lost revenue.

However, energy prices are still higher than pre-pandemic levels, largely due to the instability in global markets and the increased demand for energy during the summer months. As a result, businesses should still expect to see price increases this summer as suppliers try to recoup their losses from the past year.

Overall, energy prices are expected to remain relatively stable this summer, but businesses should be prepared for potential price increases in the coming months. By monitoring price trends and evaluating their current energy contracts, businesses can ensure they get the best deal possible and stay ahead of any unexpected price hikes.


What can your business do to stay prepared?

Businesses should consider taking proactive steps to mitigate the impact of increasing summer energy prices. This could include switching suppliers to get a better rate or locking in a fixed-price contract for an extended period of time. Businesses can also seek out renewable energy sources to reduce their costs and minimize the impact of rising prices on their operations. By taking a proactive approach, businesses can ensure that they are able to maintain profitability despite increasing energy costs.

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