Summer vs Winter: Best for Securing Energy Contracts?
In my opinion, there are two types of people:
Those that love winter; log fires, mulled wine and Christmas being sold on the shelves of the supermarket before Halloween is even over, and then, those who prefer the summer; long nights, sunshine (potentially not if living in the good old UK) and flip-flops.
However, when it comes to purchasing energy for business, what season should you love?
There seems to be a preference for summer when those responsible for energy within their business come to think about securing their energy contracts;
"I always wait until summer to agree my contract because it's cheaper"
"July was cheap last year so I'll secure my contract then"
Now, on the surface, I can understand this view.
The price of energy is driven by a number of factors- weather being one of these.
Those cold winter months put a lot of strain on the UK Energy system.
The UK power demand in the winter is around 45GW+, whilst in the summer, the UK demand is around 30GW.
With that lower demand in the summer, surely this would mean a lower price?
When the sun is shining, solar has a total installed capacity of 12GW in the UK- that's a third of the typical summer UK demand.
So, with this additional supply in the summer, surely this would mean a lower price?
I decided to look back over the past few years to see if the summer season really does provide a cheaper price.
The typical energy buyer looks to secure contracts for 12, 24 or maybe 36months- therefore I considered the monthly average seasonal charts. See these below:
** The graphs show the following:**
Electricity year ahead prices have been cheapest in the winter season across 6 of the past 8 years, and only during 2 of the past 8 years in the summer season.
Natural gas year ahead prices have also been cheapest in the winter season; during 7 of the past 8 years and only 1 of the past 8 years in the summer.
The best months over the past 8 years on average has been January for natural gas and February for electricity.
- winter is defined as 1st Oct - 31st March; summer is defined as 01st April - 30th Sept.
So, it seems that the myth has been busted- summer doesn't necessarily provide the cheapest time to secure your contract.
What can we take away from this? Avoid securing your contract in the summer months? Absolutely NOT!
What energy buyers should be looking to achieve is having the visibility of what is happening in the markets, the support to interpret this information and the flexibility to make a buying decision when the opportunity presents itself.
There is no best-kept secret to procuring your energy, understanding the market and being able to identify when the market is going to fall and rise to secure the best price for your business is key.
Remember; lowest cost supplier + lowest cost day = lowest cost of energy.
Whether utilising our fixed tracker product, backed by amber insight, or utilising our world class trade desk- amber energy can help you gain control over your energy costs.