Britain Faces Some of Europe's Highest Energy Costs This Winter

Britain will pay some of the highest energy costs in Europe this winter, and its reliance on imports to keep the lights on is forecast to deepen. The country's system operators say Great Britain will have enough gas and electricity to meet demand over the coldest months — in part because it pays higher market prices than neighbouring markets to secure those imports.

The official winter forecasts landed days after Europe's gas benchmark climbed to its highest level since December 2022, when Russia's full-scale invasion of Ukraine sent prices rocketing.

What deal kept the gas flowing?

National Gas, which runs Great Britain's gas networks, published its forecasts after striking an 11th-hour deal with the owner of a major Belgian pipeline. The agreement reverses a planned capacity cut and keeps gas flowing into the country this winter.

The energy regulator, Ofgem, approved the deal, which will add around 10p a month to the average gas bill. Without the intervention, gas could have run out in a worst-case scenario where a key part of the country's gas networks failed as temperatures plummeted.

How tight is the supply picture?

Great Britain is expected to increase imports of seaborne liquefied natural gas (LNG) cargoes by about 5% from last winter, according to National Gas forecasts. That comes as market prices sit three times higher than before the Middle East crisis severely disrupted Gulf supplies.

National Gas's winter outlook warned prices could stay elevated if UK gas buyers compete more fiercely with European countries for LNG cargoes, because gas storage levels across the continent are low.

Europe ended August on course to enter the cooler months with gas stores at their lowest level in 13 years. The slowdown in gas exports from Qatar, one of Europe's biggest suppliers, is partly to blame. Record heatwaves driven by the global climate crisis also pushed up summer gas consumption to power refrigeration and cooling.

The UK holds some of the smallest gas stores in Europe after decades of relying on homegrown North Sea production. UK production is forecast to fall 6% this year compared with last winter. The government's controversial approval this week of the new Jackdaw gasfield in the North Sea, not fully accounted for in the winter forecasts, should offer a modest supply boost when it starts up next month.

What about electricity?

Great Britain is also forecast to be a net importer of electricity over the colder months, according to a separate outlook from the National Energy System Operator (Neso). That too is likely to come at a higher cost, because European power supplies are tighter than last winter.

Summer heatwaves reduced river levels across Europe, hitting French nuclear output and Norway's hydroelectric reserves, which have stayed below the 10-year minimum since late July.

The UK paid a record £4bn on power imports over the year ending in August, according to figures from the Office for National Statistics this week. Half of that went on electricity imported from France. The UK has also made near-record payments over the past year to fire up gas plants, while wind and solar farms have been paid to turn off because of bottlenecks in the grid.

Even though Great Britain will run gas power plants less overall this winter thanks to rising renewable generation, gas's role during power supply crunches could be 7% higher than previously assumed. National Gas lifted its gas power demand forecasts for the most extreme electricity supply scenarios — unusually high demand combined with slumping renewable output — after finding over successive winters that gas plants stay in heavy use on dark, still winter days.

Glenn Bryn-Jacobsen, a director at National Gas, said: "While supply diversity and flexibility remain sources of resilience, taken together these trends in demand and supply have resulted in tighter supply margins during periods of high demand and system stress."

With European storage at a 13-year low and UK North Sea output falling, Britain's winter energy bill will hinge on how hard it must bid against continental rivals for LNG cargoes.