How is Jackdaw’s gas going to affect your business energy bills?
If you haven’t heard already, regulators have given Shell the green light to start production on the untapped gas reserves of the Jackdaw gas field east of Aberdeenshire.
BBC News has reported that Shell expects to start production in 2025, potentially contributing to 6.5% of Britain’s total gas output.
So what does this mean for your business in terms of energy rates? What does it mean for the future?
At AquaSwitch we can only speculate, but here are some things to keep in mind:
Reduced wholesale energy prices?
The majority of business gas rates come from the wholesale purchase of natural gas. The wholesale price of gas represents the amount that business energy suppliers need to pay companies like Shell for extracting the gas.
As we have reported in our monthly wholesale price update, wholesale energy prices remain at record highs due to the continued war in Ukraine, depleted UK gas reserves and a wind-less 2021 reducing the output of wind farms.
Jackdaw will only have a measurable effect on gas supplies when it starts production in 2025, so any changes in wholesale prices at present are based entirely on market speculation and may be short-lived.
Despite this, fundamental supply and demand dictate that adding supply should reduce energy prices in the long run, especially as the UK still relies heavily on gas for electricity production.
Improving the UK’s Geopolitical position?
Believe it or not, the UK’s position at the international negotiating table is a factor in wholesale energy prices.
As we covered in our recent guide to why business gas rates are so expensive, the UK is reliant on importing natural gas from nations such as Russia and the Middle East.
The Jackdaw gas field will significantly increase domestic gas production and improve the UK’s energy independence.
This greatly increases the UK’s position at the negotiating table regarding anything from trade deals that may affect your business, to being in a stronger position to help out vulnerable nations like Ukraine.
The importance of energy security
The success of any business depends on the success of the UK at any level, be it healthcare, politics, economics, or energy security.
Having an affordable and reliable supply of electricity and gas is essential for the success of UK businesses, regardless of the industry.
I doubt any of you were running a business in the mid-70s, but there was a two-month instance where industry had to operate under a three-day week restriction on energy as a result of coal strikes and a global oil crisis.
These times might seem long gone, but confidence in the UK’s ability to supply energy has been quickly eroding with the rise of wholesale prices, dwindling gas reserves, and lack of energy diversification.
Adding the Jackdaw gas reserves to the gas network certainly adds confidence in the UK’s ability to be a resilient foundation for businesses.
Increasing carbon emissions?
It is certainly hard to argue that releasing more carbon locked in within the Earth’s crust out to the atmosphere is good for the UK’s aim to become net-zero by 2050.
Protesters against the approval of Jackdaw understand this clearly and are not happy, but there is also reason to believe that things are simply black and white.
It may be argued that energy security, a strong geopolitical position and wholesale price stability are equally important in the UK’s long-term ability to reduce carbon emissions: it’s a marathon, not a sprint.
The UK Emissions Trading Scheme (UK ETS) is one way in which the UK is encouraging businesses to become green by organically phasing away from relying on fossil fuels.
Unfortunately, as environmental regulations become more stringent and overarching (this is inevitable, climate change is not going anywhere!), the costs will inevitably be paid for by businesses and households that use natural gas.
What can you do as a UK business?
Regardless of what happens outside of your business premises, be it war, inflation or new gas fields, there is a lot you can do as a business owner to become more resilient to any unforeseeable threats.
You can do an energy audit and water audit to avoid unnecessary waste of business utilities.
You can also re-negotiate your contracts with your energy and water suppliers to save money while sourcing your energy from renewable, green sources of energy.
Use our business electricity supplier, gas supplier and water supplier free comparison tools to see what opportunities for resilient change are out there waiting for you.