Business Energy Market Update: August 2026

Hot weather and further tensions in Iran saw energy prices increase dramatically in July.

Day ahead power soared by over 140% and gas saw a near 40% increase from relative lows at the start of the month, with power closing at £135 MWh and 144p/therm for gas.

As you might expect the increases extended across the forward curve with winter 2026 power gaining 25% to finish at £123/MWh, while the corresponding gas contract rose 33% to 145p/therm. Thankfully increases were more tempered further out, with summer 2028 electricity and gas rising by around 7% apiece.

Lower wind output and forecast higher temperatures for the start of August added to the geopolitical pressure driving prices up, as the UK’s energy system turned to gas to plug the gap. While the EU achieved modest increases in gas storage levels in July with capacity now at 56%, restricted supply and greater competition for LNG cargoes ensured gas prices remain elevated.

At the time of writing the US is confident of a new deal to enable traffic to resume through the Strait of Hormuz. Even if shipping through the Strait of Hormuz resumes, it is likely to take time for LNG flows to return to normal. Combined with relatively low European gas storage levels for the time of year, prices are likely to remain sensitive as we move towards winter.

While the cost of importing gas rose last month the government was not sitting on its hands when it comes to the topic of energy security. In a pragmatic move the government appeared last month to soften its stance on North Sea oil and gas, with Prime Minister Andy Burnham signposting a route to more domestic production but within the remit of the 2024 election manifesto.

Burnham was clear the UK's long-term commitment to net zero remains unchanged, however he has acknowledged that UK demand for oil and gas will continue for many years. Greater support for domestic production should improve energy security and reduce reliance on imported gas, but environmental groups have been critical of the prime minister claiming it is unlikely to have a significant impact on energy bills in the short term. Short of a complete overhaul of the North Sea licensing system, this is true, however note should be taken of the potential increase in revenue such production might bring.

With the current government’s appetite for funding reductions in energy bills directly from the exchequer, any additional tax revenues could give future governments greater flexibility when considering energy support measures. We wrote recently about the erstwhile Energy secretary, Ed Milliband considering approval for the Jackdaw and Rosebank fields. Will Andy Burnham be able to finish the job?

In any case there may need to be some reinterpretation of the current regulations for the government to achieve its aim and we can likely expect resistance from within Labour and from external organisations with an interest in preserving the environment. Whatever the case, it’s a development we are watching closely and will bring you updates when we have them.

When we think of our energy security, our focus is often external, but what if there are threats to our energy system much closer to home? Following the June heatwave whistleblowers have alleged that on 23rd of that month, the electricity system came under exceptional strain and that internal safety standards were breached, prompting investigations by both grid operator NESO and Ofgem. NESO insists the grid remained perfectly secure that no customers lost power and legal operating limits were maintained.

Regardless of the outcome of the investigations, the incident highlights how Britain's electricity system is evolving. It is clear that as renewable generation continues to grow, balancing the grid is becoming more difficult, reinforcing the importance of investment in battery storage, flexible generation and network infrastructure to maintain a secure and reliable electricity supply. Whether or not the UK came close to a significant disruption to its grid will likely take time to establish, however, events like this can still remind us why we must continue to invest and upgrade despite the increase to our bills.

In spite of the recent volatility, it's worth remembering that wholesale markets remain well below the record highs seen during the energy crisis of 2022. It is clear uncertainty is likely to continue, however businesses that review their contracts early and monitor the market closely remain best placed to manage future costs.

We hope you have found our update helpful but if you have any further questions please get in touch with the team on our usual channels.