It is time for one thing actually particular. That’s proper, your vitality provider’s weblog is delving into everybody’s favorite matter: Brexit! Please ship all of your ‘thank-you’ emails to hiya@octopus.vitality.
Jokes apart, some individuals have been questioning what the UK’s departure from the EU may imply for vitality costs. Whereas we don’t have all of the solutions, particularly till a commerce deal is agreed with the EU, we reckon it’s price letting you understand what we do know already.
Right here’s how Brexit may affect your vitality payments over the long run.
Your vitality costs will be damaged down into 4 essential sections – wholesale prices, community prices, environmental obligations and ‘different prices’.
Let’s check out how every of those prices could possibly be affected by Brexit:
| Share of invoice | Chance of Brexit affect | |
|---|---|---|
| Wholesale | 36% | Onerous to say at this stage |
| Community Prices | 26% | Unlikely |
| Environmental and Social Obligations | 23% | Unlikely |
| Different Prices (inc. VAT, methods, employees, unhealthy debt) | 15% | Unlikely |
How Brexit may have an effect on wholesale vitality costs
Wholesale electrical energy prices change rather a lot from one second to the subsequent (each half an hour of the day actually), based on a bunch of things like climate, buyer demand, world vitality manufacturing, and foreign money fluctuation. For instance, when vitality is most in demand, round meal time, costs are a lot greater than they’re at 3am.
Octopus buys your fuel and electrical energy from the wholesale market upfront to scale back the affect of extremely variable costs on prospects. For this reason we are able to decide to set costs for purchasers on mounted tariffs, and hold costs steady for purchasers on versatile tariffs.
Over the subsequent yr or two as prospects attain the tip of their mounted contracts and it comes time for us to purchase their vitality for the yr forward, actions in wholesale prices (both up or down) will issue into the brand new costs we are able to provide.
The UK imports round 55% of its vitality from Europe and the remainder of the world. That is the place Brexit may have an effect – by means of foreign money fluctuation.
If the pound drops in worth by 10%, the UK must pay 10% extra for the vitality it imports. It’s arduous to know precisely how alternate charges could possibly be affected by Brexit – depending on how, when, and if it occurs. However there’s so much to recommend the affect wouldn’t be too unhealthy. Foreign money markets are naturally threat averse. To some extent, the danger of Brexit taking place has already been priced into present alternate charges.
We solely purchase UK inexperienced vitality. So how come the price of imported vitality makes a distinction to our vitality buying prices?
Wholesale energy is traded as a single, homogenous product, no matter the way it’s generated. What does that imply? Apart from how a lot air pollution they pump into our ambiance, the electrons coming down the wires have basically the identical bodily traits and high quality irrespective of in the event that they’re generated within the UK or abroad, and from a inexperienced, low-carbon supply or a fossil gasoline supply. Meaning the costs of all completely different vitality era varieties are tied completely. If the value of imported, fossil gasoline generated energy goes up, the value of all energy, together with UK renewables, goes up too.
Different elements that would affect on wholesale costs…
The Emissions Buying and selling Scheme
As an EU member state, the UK was additionally a part of the EU Emissions Buying and selling System (ETS). ETS is a type of carbon pricing by which a restrict to the overall EU emissions is ready annually and divided into ‘allowances’, every equal to at least one tonne of CO2. European electrical energy turbines who emit CO2 should buy these allowances, in proportion to their emissions (generally often known as Carbon Credit), or face a hefty penalty.
If the UK Onerous Brexits, we’ll now not belong to the EU ETS. The UK must undertake our personal emission buying and selling scheme. It’s unsure what affect this may have on wholesale energy costs, however we are going to proceed to observe these developments intently.
Power ‘interconnectors’
The UK imports energy from continental Europe by means of wires known as ‘interconnectors’ that get to us through France. The protected operation of those wires and commerce of vitality by means of them is protected by EU laws. All international locations certain by these legal guidelines are a part of an Inside Power Market. If there’s a arduous Brexit, we’ll be “decoupled” from this group. There’s an opportunity there may even be disruption to vitality being imported into the UK, which may result in an vitality value improve and extra volatility within the wholesale market.
It is within the EU’s curiosity, and the UK’s curiosity, to maintain the ‘interconnectors’ operating as they all the time have. The excellent news is that our Authorities has pledged to maintain working them with the present EU laws to scale back the prospect of disruption. If we Onerous Brexit, there’ll ultimately be tariffs on all imported vitality. The UK has volunteered to droop any tariffs on energy imports for 12 months
What else makes up my vitality prices, and why received’t or not it’s affected by Brexit?
Community Prices
The wires that carry our electrical energy and the pipes that ship our fuel are owned by British firms.
The price of sustaining and upgrading these networks is managed by Ofgem, on behalf of the UK authorities, and so is unlikely to be impacted by Brexit.
Environmental and Social Obligations
These prices go in the direction of supporting the event of UK renewables, home vitality effectivity initiatives and help for susceptible prospects.
Quite a lot of these schemes are aligned with worldwide targets and it’s attainable that the UK authorities may withdraw their help after Brexit. Thus far, the federal government hasn’t proposed any new adjustments to those schemes, and so, the chance of Brexit-based impacts is low.
Different Prices
As a part of our tech-led method, we handle our enterprise by means of our personal proprietary tech. This implies we will be extra operationally environment friendly than another UK vitality suppliers, and provide low value tariffs. It additionally means we’re not so reliant on third events who might need to extend prices after Brexit.
So what does this all imply for me? Will my payments improve?
When you’re on a hard and fast value tariff, your charges are locked in until the tip of your contract. You’ll be able to all the time repair your costs once more now, as we’ve got no penalties for switching tariffs or leaving your contract early. Simply over a month from the tip of your contract, we’ll be in contact with all our new costs, so you may select to repair your tariff once more.
When you’re on our versatile tariff, your costs might be based mostly on the wholesale value of vitality and the opposite prices we went into earlier. They could be affected by Brexit (though you’ll all the time have at the very least a month’s discover of any upward change) — however as but, we simply don’t know. Don’t overlook, you may repair your costs for 12 months any time. Simply go online to your account and select a hard and fast tariff in order for you that certainty.
When you’re on Agile Octopus or Octopus Tracker tariffs, which observe the wholesale value of vitality, then after all you’ll see any adjustments – upward or downward just about instantly.
