UK electricity prices in August have tripled year on year, 86% of which has been caused by soaring costs of fossil gas, a new analysis from London-based think tank, Ember, found on Tuesday.
UK electricity price per megawatt-hour surged to £107 in August this year from £36 in August last year, marking a megawatt-hour increase of £71.
Costs of fossil gas, also used in electricity generation, rose by £61 per megawatt-hour during the same period.
According to Ember's calculations, prices remained flat over the previous twelve months from August 2019 to August 2020.
Last year, around 37% of the UK's electricity generation came from gas, the price of which doubled since the end of last year.
A colder winter that depleted gas storage levels, increasing demand and prices in Asia which resulted in more liquefied natural gas (LNG) shipments being delivered there rather than Europe, rising global gas demand as countries ease COVID-19 restrictions, and lower Russian gas supplies to Europe have led to soaring natural gas prices.
The study, analyzing the fossil gas cost component alone, found that the increase in fossil gas costs equates to 86% of the wholesale electricity price jump of £71 per megawatt-hour.
This highlights the risks associated with continued dependence on volatile fossil gas that is highly susceptible to geopolitics and global events, according to the analysis.
The escalating electricity prices led a number of companies to halt their operations last week. A fire at the National Grid site in Sellindge, Kent, shut down the cables that imported electricity from France last week, which led to further price increases.
This electricity is estimated to be offline until Sept. 25 and one gigawatt, half of the total capacity, will only be available until March next year.
From renewable energy costs quoted by the International Renewable Energy Agency, the analysis showed that generating electricity from existing UK fossil gas power plants is three times more expensive than from new onshore wind and almost twice that from new solar.
The cost of electricity generation from fossil gas, including the associated carbon allowance costs, also tripled by exceeding £100 per megawatt-hour in August 2021 from £29 per megawatt-hour in August 2020, Ember calculated.
The UK Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, said during a speech Monday that the global gas situation has resulted in the exit of some energy suppliers.
'We have already seen four suppliers exit the market in recent weeks and we may well expect to see further companies exiting the market over the coming weeks. The government will not be bailing out failed companies and the taxpayer should not be expected to prop-up companies who have poor business models and are not resilient to fluctuations in price,' he said.
Although the UK has enough capacity to meet demand and is not expecting supply emergencies to occur this winter, wholesale prices are of concern for the UK, which Kwarteng said is too reliant on fossil fuels.
'Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to strengthen our energy security into the future,' he noted.
£1 equals 11.81 Turkish liras.
By Nuran Erkul Kaya