Business Energy Market Update: May 2025

April’s spot prices continued their downward trend from March as good weather and fair wind output helped to reduce reliance on gas for power leading to a whopping 13% reduction on day ahead gas contracts. As a result, the losses extended into summer and winter trading for 2025 with both commodities losing roughly 8% on their values from a month earlier. On the global stage, market uncertainty due to economic fears over Trumps tariffs continues to keep prices in check as does softening LNG demand from China as its storage facilities are near full at this time.

The big energy news this month comes not from the UK but further afield where Spain, Portugal, and parts of France experienced a widespread power outage on 28th April after a major interconnection point between the power grids of France and Spain experienced a sudden outage.

The incident, which reportedly caused the Spanish grid to lose 15 GW of power within 5 seconds (equivalent to 60% of national demand), appears to be resolved for all three countries at the time of writing.

Whilst the cause is still unknown, a cyber attack has been ruled out and authorities have denied the volume of renewable power on the grid was to blame although some experts are not so sure.

Solar farms produce power without rotation and other renewable energy sources such as wind can often be ‘non-synchronous’ due to varying wind speed and as our energy grids are designed to work on a frequency of 50 Hz, we need generation assets that spin at the right speed to balance the grid. In addition our grid needs inertia (all the spinning bits in power stations) as this helps to soften the impact of a sudden power outage should a generator trip offline.

In the case of the Iberian power cut, an interconnector failure may well have been a significant enough event to destabilise the entire power grid especially, coming as it did just after midday when solar output would have been near the maximum. In the short term the authorities concerned are unwilling to confirm this was the case until they have completed their initial findings however.

In the UK, NESO the operator of our grid is well aware of the issues faced by increasing amounts of renewable energy and has invested in several projects over the last few years to ensure the lights stay on as we move away from fossil fuels. For example, the Keith Greener Grid Park in Moray has recently seen two enormous flywheels installed to help keep the grid balanced at the right frequency. The inertia this facility provides means that more renewable energy can be added to the grid and there will be less instances in the future where green energy has to be turned off and fossil fuel powered generators, with their inherent stabilisation properties, used instead. A situation everyone will welcome not least because the grid has to pay green generators to switch off.

Although the new price cap has been in force for the last month Id also like to gently remind all our customers who also have a domestic tariff that the price cap changed on the first of April and that if you haven’t already, it might be a good idea to look at moving on to a fixed tariff. My advice is to make sure it has no exit fees as there may well be some better tariffs coming from the domestic suppliers by the end of summer.

We hope you enjoyed our update and if you have any energy or utility related queries you think we may be able to help with, give us a call. The team are always on hand to help out!