The start of 2024 has coincided with the expectation that businesses will need to operate in a landscape shaped by geopolitical intricacies, technological challenges, and environmental imperatives. In this climate, perhaps one of the most notable, and welcome improvements was that for the first time, we saw more power generated from renewable energy sources compared to any other fuel source.

We also saw Ofgem provisionally approving plans for two high-voltage cable links to and from Europe. These will have the potential to supply electricity to millions of homes in Britain. The consultations have been launched for the proposed LionLink interconnector, linking British and Dutch power grids with Dutch wind farms, and the Tarchon Energy interconnector, connecting Germany and Britain. These projects could add 3.2GW of capacity to Britain’s existing 11.7GW interconnection capacity.

The state of the wholesale energy prices

After a couple of cold spells in December 2023, January 2024 saw above seasonal normal temperatures (averaged over the month). This, coupled with a decrease in UK gas demand, led to a considerable drop in wholesale gas and power prices in the first few weeks of January.

As we moved from January to February, healthy gas storage levels across European facilities (comfortably above 20% for this time of year), helped to drag wholesale prices down further, and during the middle of February, we saw some of the lowest wholesale rates for gas and power that we have seen for three years.

In February and March, wholesale gas and power prices gained a little traction, and the general trajectory during March has been an upwards one. Even so, we still ended Q1 with large falls in power wholesale rates, especially for Winter 24, which saw a drop of 15.2% compared to the beginning of Q1. Although the falls to gas wholesale rates were not as significant as seen with power, all periods ended with a reduction to rates with Winter 24 leading the way with a decrease of 11.9% during the quarter.

Top 3 themes that have dominated the sector and possible impact in Q2

The UK has recorded a major reduction in CO2 emissions

Data from the Energy and Climate Intelligence Unit’s (ECIU) Power Tracker indicated that renewable generation reached approximately 55TWh (terawatt hours) during Winter 23/24, surpassing the estimated 45TWh generated by gas. However, despite the good news on renewables, if we look more broadly, we’re heading backwards on energy independence, as the government fumbled its last renewables auction securing no new offshore wind farms.

This was particularly flagged up as a priority by a group of cross-party MPs and peers (across Labour, Lib Dems, Green Party, SNP, Plaid Cymru, and Alliance) that have called on the Chancellor to prioritise new public investment in Net Zero infrastructure and skills as part of the Spring Budget, in a move they argued would help to “future proof our economy and our energy system”.

The impact of the Spring Budget on the energy market

The Chancellor’s Spring budget at the beginning of March has received mixed views from the UK energy industry. The £800 million earmarked for new offshore wind was welcomed in some circles, but it also reignited feelings that we have missed the opportunity to maximise our offshore wind capacity for future generations. Initial views suggest that this Summer’s allocation round should achieve circa. 5GW of new offshore turbines as a result, but that is not sufficient to keep us on track for our 2050 Net Zero plans.

Other key energy-centric highlights from the 2024 Spring Budget:

  • The extension to the windfall tax on the profits of North Sea oil and gas companies is now totaling a year – this is expected to raise £1.5bn (US$1.9bn). The tax was first introduced in May 2022 following Russia’s full-scale invasion of Ukraine, which sent gas prices soaring. Despite being due to end in March 2028, it will now continue into 2029.
  • The government will spend £160m (US$204) on two nuclear sites, one in Anglesey (North Wales) and a second in South Gloucestershire.
  • Ofgem has provisionally approved plans for two high-voltage cable links to Europe, which are aimed at supplying power to millions of homes in Britain. These projects could add 3.2GW of capacity to Britain’s existing 11.7GW interconnection capacity.

Legislation Lethargy affecting UK businesses

The increasing volume and intensity of sustainability reporting is starting to have an undesirable impact on businesses, according to a study released by facilities management company – Mitie. The survey revealed that more than half of sustainability decision makers quizzed think current requirements are too complex, with almost two fifths admitting they are unclear on what they should be reporting on.

Worryingly, more than a quarter of decision makers quizzed by Mitie said they are unsure whether they are equipped to comply if legislation becomes stricter, while 60% are worried about the impact on both their reputation and company finances if their reporting falls short of requirements. A clear majority of 58% of business leaders do not favour the adoption of one international framework for reporting and most were also not in favour of sector-specific frameworks, a UK-wide standard, or a UK and EU-wide standard.

ARO can help

We know that keeping pace with evolving environmental regulations and standards can be time-consuming and often confusing, but at ARO we take the time to understand the particularities of each reporting requirement. We have the expertise and knowledge to guide companies in staying compliant with reporting requirements and emissions targets set by regulatory bodies.

ARO’s expert Net Zero and Carbon Management teams can help you to transition to a carbon-neutral future whilst boosting business performance. As a first course of action, a comprehensive assessment of your energy use and emissions can identify areas for improvement and set clear Net Zero goals tailored to your industry.

Sign up for our complimentary energy audit today and embark on a journey towards greater efficiency, cost savings, and environmental responsibility.