Energy Crisis UK: Enexus Energy director shares key advice and reasons for the crisis - will it be resolved?

Enexus energy is an independent consultancy based in Lancashire with a core focus on helping customers to cut costs, consumption and carbon.

Dan Serghi, director of Enexus Energy, shares his knowledge and expertise on the industry, answering your most-asked questions on the current energy crisis.

Mr Seghi said: “These levels we have reached are unprecedented, unsustainable and I’m sure at some point the market will see corrections.”

Why are we facing an energy crisis?

According to Mr Serghi, factors from both the height of the pandemic in 2020 and what has happened over the last fortnight, are key to why there is an energy crisis.

Last year saw “a lot of businesses close which really suppressed demand so prices were very low. As lockdown measures have eased we have started to see prices rising.”

“Following that we’ve seen the EU and UK admissions market trading carbon permits in a very unpredictable manner which has caused the price of carbon to soar this year,” he said.

Mr Serghi highlighted how this has had a “considerable impact on where we’ve seen electricity and gas prices going over the last 6 to 8 months.”

Another factor in 2020 was very low European gas storage which has caused “a lot of issues because we are having to look at ways to top that up” and this problem has been escalated by the UK having “less liquified natural gas...than we have had in previous years”.

The delay in the pipeline from Russia to Germany which is known as Nord Stream 2 “has been a bit of a kick for the market” causing prices to increase.

“That was anticipated to come online this year and unfortunately it’s awaiting approval from Germany which isn’t looking likely now till next year,” Mr Serghi said.

Another factor is last week’s fire at the IFA interconnector between France and the UK. “That has removed 2 gigawatts of capacity which has forced us to rely on other fuel sources.”

Key advice to customers

The main advice from Mr Serghi is “to appoint an energy expert” and make sure the expert is  “looking at your business and coming up with a strategy that works for you.”

The director also offered important advice to clients whose supply contracts are soon to be due.

“If your supply contracts are due within the next few weeks or even a couple of months we certainly recommend making sure that you’ve got something covered and in place. We are in a very turbulent market and you are better paying a higher price right now than falling onto a deemed out of contract tariff.

If your renewal isn’t due until April 22 our advice would be to hang fire because if we do have a mild winter and Nord Stream 2 does come online next year there is potential for prices to ease come Q1 22.”

Mr Serghi also advised clients to look at energy reduction: “supply is one thing but if you can use less and actually produce you’ll certainly be on your way to a stronger position.”

Advice to customers whose suppliers have gone bust

To put those clients at ease “Ofgem will appoint a new supplier” that “will pick those customers up so they will always remain with a supplier”.

“If your supplier has gone under, don’t panic. You will continue to receive electricity and gas, and you’ll be switched to another supplier,” Mr Serghi assured.

As some suppliers have folded during the past couple of weeks Mr Serghi suggests Ofgem needs “to increase a bit more governance” on small suppliers to “prevent these sorts of things from occurring.”

“They need to look at tighter financial fitness checks on suppliers. If they are forcing customers to be at risk at this point, I think ultimately there is something flawed within their business models, and as the governing body that’s in place there they need to regulate that to a higher level,” he said.

Will the energy crisis be resolved?

For the crisis to be resolved Mr Serghi highlighted the importance of the UK in “increasing investment into the renewable side and reducing our reliance on the continent and also imports” which has “been an ongoing issue.”

On a positive note Mr Serghi said: “if we do see Nord Stream 2 come online a little bit sooner that will provide a lot more relief in the industry” and if we have no more disasters this winter we could “start to see a recovery.”

What will this winter be like?

It isn’t all doom and gloom for this winter, as Mr Serghi said European storage is filling at a reasonable rate. This means a bit more demand can be met and the increase of Norwegian gas flows should help push prices down.

He said there is “an ample amount of supply” to stop there from being blackouts over the coming months.

In order for the crisis not to escalate any further Mr Serghi states what he thinks needs to be done.

“We need European politicians to approve Nord Stream 2 and allow Russian gas supply to the continent so that we can see prices return to more of a normal level.”

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