The global energy crisis has affected both Europe and Asia, but the British market is particularly affected. The United Kingdom is facing a series of bankruptcies of companies dedicated to the energy sector and its electricity market has been cut in half since the end of August.
In total, 25 companies have closed since August due to the crisis triggered by a sudden increase in the price of natural gas.
That means there are 28 operators left in the country, said the Office of Gas and Electricity Markets (Ofgem, by its acronym in English), which is the sector’s regulator.
In the United Kingdom, the atmosphere of tension has increased since it was announced that Bulb, a renewable energy provider that until now was the seventh largest operator, is going to enter bankruptcy.
Bulb has, so far, around 1.7 million customers.
It is estimated that the operation could cost British taxpayers 1.7 billion pounds (2.3 billion dollars) or could mean an eventual sale or acquisition of its clients by other operators.
Experts predict that this cost will affect consumers’ bills over the course of a year, which added to the increase in rate limits will leave the poorest households in a difficult situation.
Why so many bankruptcies?
Other European countries are also affected by this crisis generated by strong demand for natural gas, the arrival of winter in Europe and the fear that Russia will tighten the nuts on its supply, among other factors.
In Spain, France and Germany some small operators have gone bankrupt in recent months, but the United Kingdom has certain peculiarities that make it more vulnerable.
Despite the growing share of wind energy in its production, the country is more dependent on natural gas than others.
“In Europe, price increases have been dampened by the common electricity market,” explains the expert. And gas storage capacity in the UK is also “particularly low,” said Veronika Grimm, a professor at the Friedrich-Alexander University of Nuremberg in Germany.
Pressured by the rate cap?
Many UK suppliers were caught between these gas increases and the cap on the prices they can charge customers. That limit is created to protect consumers from surges.
“Stress tests may be necessary in the future to ensure that companies entering the market are sufficiently well positioned” to withstand the pressure, Grimm said.
While some deputies, especially the conservatives, ask that this limit be eliminated, other critics, such as the Unison union, demand the nationalization, at least partially, of the sector.
Is it the fault of liberalization?
The expert pointed out that the liberalization of the market in recent decades has favored competition and facilitated the entry into the market of new participants.
Consequently, many small operators did not have the financial strength to withstand the increase in purchase prices.
However, some specialists consider that privatization has brought benefits such as “great cost reductions and innovations”.
Smart billing and electric car charging, while the sector was still heavily reliant on coal before liberalization, said Richard Green, a professor at Imperial College London.
Grimm also estimated that the regulator should “accelerate the energy transition.” More renewable energy means less dependence on natural gas, he stressed.
Reference-www.eleconomista.com.mx