The Perfect Storm — The UK Energy Crisis and How Brokers Can React

2 min read
12 October, 2021

It’s been a turbulent few weeks for the UK’s energy market – wholesale prices have spiked multiple times, and suppliers have constantly pulled pricing as a result. It’s been hard to sell to customers on rates up to 30% higher than they signed up for on their last contract, and of course, with some smaller suppliers going into administration, brokers have been scrambling to recover commission and re-sell contracts to the supplier of last resort.

So what got us here, when will it calm down, and what can we do in the meantime?

The energy crisis has a few different causes, which have combined to make a worldwide shortage much worse in the UK.

  1. Natural gas shortages: A combination of high demand from Asia and lower than usual supply from Russia have made it challenging to obtain natural gas worldwide. Natural gas is responsible for around half of UK electricity generation
  2. Lower wind power generation: Some of the least windy months since 1961 has pushed the UK’s share of electricity generated from the wind down to below 5% on some days
  3. Lower gas storage: The UK has some of the lowest natural gas storage levels in Europe, making a Europe-wide problem more acute in the UK

There is a general consensus that the market volatility will last for around 2-3 months more, until winter natural gas stocks are bought up, and prices begin to stabilize. However, unless the above factors are addressed, there is no guarantee that the issue will not re-occur next Autumn.

So, what can brokers do to ride out the storm? At POWWR, we are seeing a number of trends TPIs are following to get through:

  1. Concentrate on the more prominent suppliers: We are seeing a concentration of contracts with the larger suppliers. They are possibly better placed to get through the crisis due to hedging and potentially offering lower prices. This may be a good strategy but still comes with risk and potentially low reward depending on the uplifts offered
  2. Focus on customers on variable rates: An easy sell to any customer at the moment is that they are on variable rates (they may not be aware of this) and will be paying well over the odds. Getting them locked into a lower fixed rate with a new supplier could prove your worth as a consultant and get you a loyal customer for life
  3. Diversify internationally: The US is currently a promising market for UK brokers. Many states are recently deregulated and are in some ways comparable to the UK 10 or 20 years ago. Many customers are on high variable rates with high usages. What’s more, there is the ability to sell some time ahead, in some cases up to 2 years. Many suppliers also pay upfront, making this an excellent incentive for TPIs as well. POWWR has recently extended aggregation services to the US for our UK broker partner. Please contact us to learn more about how you can begin selling in this exciting new marketing.

Learn about POWWR's US Energy Aggregation Opportunities

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Written by: Patrick Gardiner – Senior Vice President, Customer Success

Throughout his career, Patrick has put the customer at the heart of what he does, working from both an Account Management and customer success perspective. If it’s not working for POWWR’s customers, it’s not working for POWWR, and Patrick works with our customers to make sure any upgrade to our products will benefit them all. Patrick previously managed delivery of translations and localization for some of the world’s largest companies, including Amazon and Adobe, before moving into the energy industry 2 years ago.

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