Getting to grips with wholesale energy prices is taxing at the best of times. Determining what suppliers pay for electricity and gas, and what this means for you may seem like a simple task, however, finding the answer can prove a challenge.

To give you in-depth insight, we’ve created a handy guide detailing everything you need to know about wholesale energy prices, how they affect your bills, and how industry prices altered over the years.

What are wholesale energy prices?

First things first, what are wholesale energy prices? In a nutshell, they're the electricity prices suppliers succumb to when purchasing energy for their customer’s consumption.

As with any market, these wholesale electricity prices can fluctuate due to supply and demand. A good example of this? Seasonal energy usage. Throughout the cooler months, homeowners will switch lights on earlier for longer periods, and crank the heating up higher. As you’d anticipate, this usage creates a higher demand. In response to this, prices increase.

Other aspects to affect energy prices and the wholesale market include the supply of gas or electricity and whether it’s stable, and the ever-changing energy habits of consumers. For example, both seasons and concerns surrounding green energy affects wholesale electricity prices.

What are the benefits of buying electricity at wholesale prices?

If you’re a fan of monitoring the energy market, buying electricity at wholesale prices is likely to appeal to you, and something that will allow you to aim for lower energy bills. Wholesale energy purchases are a little like Costco purchases, except you’re buying electricity and gas from electricity suppliers instead of giant bottles of ketchup.

The major benefit? Wholesale products are often a great deal cheaper than non-wholesale items, meaning you get more bang for your buck when it comes to competitive tariffs and energy bills.

Top wholesale electricity suppliers are a dab hand at predicting when energy is at its best rate and how much energy use is required. This allows them to purchase the correct amount at a great price, which in turn allows them to charge customers a great deal less.

Once they have purchased the energy, they package it into bundles for their customers. This is an asset to both homeowners and business owners looking to power small and larger premises.

At Business Energy UK, we’re determined to offer all our customers a great, cost-effective deal, while assisting them on their journey towards a greener lifestyle. Our team of experts closely monitor wholesale markets, investing in energy when it’s at its lowest price. Ensuring they get the best deal possible allows them to pass these savings on to you.

How do you buy on the wholesale market?

The wholesale electricity market comprises a series of competing generators, all of whom offer their electricity output to a variety of energy suppliers. Suppliers purchasing this energy will re-package and re-price the electricity, selling it to both business and households.

This power can be brought in via inter-connectors, which at present are in place between France and Britain, as well as Ireland and the Netherlands. The NGET (National Grid Electricity Transmission) currently takes ownership of the entire wholesale electricity system and sells electricity to the electricity market.

Although a handful of large industrial companies can buy their electricity directly from the wholesale market, this is extremely rare. The majority of businesses will invest in the services of a business energy supplier, who will take it upon themselves to manage their energy consumption and tariffs.

What are the differences between a variable and fixed-rate tariff?

There are two key market options to choose from, these include fixed-rate tariff types, which as the name suggests, means wholesale electricity prices won’t alter during the timescale of your tariff, and a variable tariff, which can fluctuate in price.

Fixed-rate tariffs are often considered a safer bet as wholesale prices don’t affect payments, at least not until the tariff comes to an end. This means gas and electricity prices are fixed with a price cap.

Variable tariffs on the other hand are affected by the current electricity market, which is good and bad in terms of price volatility. If the market is good, it can mean you get much more power for your money as this pushes prices down. When it comes to electricity bills, many treat variable tariffs in the same way they would treat stocks and shares.

Want to see how much you stand to save on wholesale electricity prices? Request a quote from Business Energy UK today.

Frequently Asked Questions

This price is entirely dependent on when you purchase wholesale electricity. You can opt to buy months (or even years) in advance or alternatively, the day before you require it.

This price varies in response to both local and geopolitical matters. Factors to take into consideration, which can cause wholesale electricity prices and power prices to move, include storage issues or gas shipments not arriving.

If you, like many, prefer to follow the trends of wholesale electricity prices, buying wholesale electricity from electricity suppliers via day ahead prices is highly recommended.

The current wholesale electricity price (per megawatt-hour (MWh) is £45. Looking to learn more about average market prices? Get in touch with us today.

As with electricity costs, gas prices are dependent on when and how you buy them. The current day-ahead rate for gas, per Therm, is 38p. One Therm is the equivalent of 29.3 kWh.

Over the past three years, both electricity and gas prices have altered dramatically. Worldwide issues, such as the Corona Virus pandemic, have affected these rates. For example, there was a change in prices in March 2020, which was the event of the first Coronavirus lockdown. These prices are now showing signs of returning to their previous levels.

Want to see how your bill compares to others? Speak to one of our helpful advisors today.

When it comes to buying wholesale energy, suppliers use various approaches. These include purchasing electricity the day before it is required or years in advance. The biggest challenge for suppliers is determining how much power they will need and when it will be cheaper. Knowing these facts allows them to purchase the correct amount at the correct time. The result? A better deal for their customers (you!).

Because of supply and demand, wholesale energy prices affect the energy market in different ways. This is dependent on the numbers of people and businesses wanting to purchase energy at lower prices and how much product power stations have available to sell.

In the United Kingdom, electricity prices are partially linked to gas. Why? Because gas is required to produce electricity. This results in the price of electricity going up or down, in response to current gas market trends.

In the future, this is likely to change and prices will be determined by the increasing sum of renewable energy being generated.

As of May 2021, the wholesale electricity price (per megawatt-hour (MWh) was £45. This can change regularly, which is why those in the know will closely monitor the market trends. This will assist them in buying at the right time for the best possible price.