Is Gas or Electricity Cheaper?
A common question asked to members of the energy industry is “which is cheaper when it comes to heating your premises, gas or electricity?”
AskTED’s goal is to keep you informed on the best energy decisions for your business and provide all of the help necessary to achieve your energy goals.
Pricing of Electricity and Gas
Gas is currently sitting between 20 to 30 pence per kw/h,- whereas one unit of electricity from the mains will set you back around 60pence to 100pence per kw/h. So, although pricing can fluctuate, gas is around 3-4 times cheaper than electricity.
How is energy priced in the UK?
Suppliers have access to buying energy wholesale, and often suppliers will use various approaches. Approaches suppliers can take include purchasing electricity the day before it is required or up to years in advance. One challenge that suppliers have to face is calculating exactly how much energy they will need and when it is likely to be cheaper. These decisions allow them to purchase the correct amount at the correct time. In the end, achieving a better deal for their customers.
Supply and demand has a great effect across the wholesale energy market and this affects the energy market in different ways. Supply and Demand is dependent just how many businesses and homes are needing to purchase the energy and how much is currently available to be sold via energy generation companies.
In the United Kingdom, electricity prices are partially linked to gas. This is due to the fact that currently gas is required to produce electricity. With gas being roughly 3 times cheaper than electricity it is used to power turbines that then generate useable electricity.
The drawback to this method is that it then results in the price of electricity going up or down, in relation to current gas market trends which is further compounded upon when brought under exceptional circumstances such as the halting or reduction of gas supply to the country.
In the future, this is a system that is likely to face some level of change and prices will be determined by the increasing sum of renewable energy being generated.
Factors for Consideration
Although gas comes in cheaper than electricity, there are other things you should consider before choosing it to power your property/building.
1. Gas boilers aren’t as efficient as electric counterparts
Gas boilers are inefficient when compared to electric models and even a brand-new gas boiler is only around 90% efficient.
2. Do you have access to grid gas?
Your home may not have access to grid gas and would have to find an alternative (LPG) if gas is the option they want. Accessing gas in this way is usually more expensive and therefore homes like this tend to go for oil or electricity.
3. Environmentally friendly energy options
If you’re looking for a more environmentally friendly option, then biomass boilers or heat pumps could be the best option for you. It’s important to speak to an expert when choosing your energy supply so that you have all the necessary information regarding efficiency, cost and the impact on the environment.
Why are energy prices high compared to a year ago?
The current prices of energy are the culmination of a number of things, presenting ‘the perfect storm’, following the ease / end of covid restrictions the usage and demand of gas on a global scale had increased as economies started the recovery process.
A lack of wind in the summer of 2021 led to lower amounts of power generated via turbines, which then resulted in an increased demand from conventional power sources (fossil fuels etc).
Gas storages in 2021 leading into the first quarter of 2022 within Europe have remained far below that of previous years with no clear method of replenishment throughout summer given the suspension of Russian gas flows due to conflict sanctions.
Gas storage within the uk is at less than 2% of the UK’s annual demand which is extremely minimal when compared to the 22% found within other European countries.
The UK sources almost half of its gas supply from the EU, who source most of their gas from Russia, meaning they feel the knock-on effects from the Ukraine conflict due to sanctions imposed onto Russian gas.
This leaves a greater demand for other European Gas sources, leading to an overall increase in wholesale gas prices.
Following the invasion of Ukraine, plans for the Nord Stream 2 gas pipeline that had been designed to double the flow of gas between Russia and Germany, were abandoned.
For more information on your energy supply or AskTED, feel free to get in touch with a member of our team today. We can help you to find the right deal to suit your needs and lower your overall energy bill.