Good morning, and welcome to this week’s market update from Smarta Energy.
This week, I want to start with the question businesses are actually asking: if energy is this expensive, what are we meant to do about it?
Wholesale gas for this coming winter is close to 200 pence per therm, whilst power is around 159 pounds per megawatt hour. Those are very high prices. Even when day-ahead markets trade below them, energy is not cheap and there is no meaningful short-term relief for businesses at the moment.
Waiting feels risky, but fixing everything at today’s winter price may feel equally uncomfortable. Doing nothing is still a decision, though, and leaves the budget exposed to whatever happens next. The better question is how much certainty the business needs, over what period, and where the market is offering relative value.
So this brings us to contract length, because the shape of today’s market is unusually important. The next year is carrying a very large premium, there is no getting around that, but prices further ahead are considerably lower.
By summer 2028, wholesale gas is around 83 pence per therm and power is about 71 pounds per megawatt hour. Further out, summer prices are generally in the mid-to-high 60s. That is not necessarily cheap by historic standards, and the curve is not a prediction. But compared with this coming winter, the difference is substantial.
A longer contract can blend an expensive opening period with lower-priced years further ahead, whilst also providing greater budget certainty and avoiding the need to renegotiate the entire energy position every single year.
That does not mean every business should fix every unit for five years. A longer agreement must match expected consumption and the need for flexibility if sites or output change. Some businesses may prefer a fully fixed arrangement. Others may want a longer flexible contract and the ability to buy in stages. Contract length and purchasing strategy are separate choices and must be handled separately.
What we are talking about are the wholesale prices, not the final figure on a supplier quote. Delivered costs include the shape of your consumption, network and policy charges, supplier costs and margin. Even so, the signal is clear: the market is charging heavily for risk in the next year or so, whilst offering much better relative value beyond it.
So, having looked at the commercial decision first, let us turn to why the market looks like this.
The market is not pricing an immediate UK shortage. It is pricing the possibility of disruption to gas infrastructure, reduced LNG availability, low renewable output, or problems with European power imports.
Further ahead, it assumes that supply expands and some of today’s exceptional risks fade.
That contrast between immediate risk and longer-term optimism is particularly clear in the gas market.
The UK has two LNG cargoes due this week, one from the United States and one from Algeria. Temperatures are also expected to remain above the seasonal norm, keeping heating demand relatively low. Those factors may stop the market rising quite as quickly, but they do not make current prices comfortable or normal.
The bigger concern is infrastructure. Ukraine has reportedly carried out its deepest strike of the war, hitting a Russian gas facility in the Arctic around 3,000 kilometres from the border. That keeps a risk premium in nearer-term prices.
There are diplomatic developments to watch as well. Qatar says efforts are under way to restart talks between the United States and Iran. Genuine progress could reduce concern around Middle Eastern gas flows. President Xi is also due in the United States this week, with speculation that China could revive a major agreement to buy American LNG. That could leave fewer US cargoes available for Europe.
There was also an important update over the weekend. QatarEnergy said the crisis around the Strait of Hormuz may delay large LNG expansion projects expected in 2027 and 2028. Those projects help explain why later gas prices are cheaper. If the extra LNG arrives late, the route towards lower prices may be less smooth than the curve suggests.
Further north, proposed expansion of Norwegian Arctic gas would not materially change regional supply until the mid-2040s, according to analysis from the WWF. It cannot solve the challenge facing buyers over the next few contract years.
Moving from gas to power, the connection is straightforward. When wind or imports are low, the UK often needs more gas-fired generation. If gas is expensive, that pushes up the cost of producing the final unit of electricity needed to balance the system.
Wind generation is forecast to average about one-third below normal this week and dip particularly low tomorrow. That means more gas-fired generation at exactly the point when gas itself is costly.
France matters because the UK imports electricity through interconnectors. Last week’s French energy strike reduced generation by about 6.5 gigawatts at its peak. Most returned the following morning, but renewed action could reduce the power available for export to the UK.
Also, hydroelectric generation across Europe is also running around one-fifth below normal following very low river levels. With little recovery expected before October, the system has fewer cheap alternatives and may again need to lean more heavily on gas.
The longer-term picture is more encouraging. Construction has begun on a Belgian battery able to store 2.8 gigawatt hours of electricity, with completion planned for 2028. Batteries store renewable power when it is plentiful and release it when the system is tight. More projects across linked European markets should reduce some expensive peaks caused by low wind and high gas use.
So, what should businesses take from all of this? The immediate market remains very expensive and vulnerable to geopolitical news, weather and infrastructure problems. Comfortable supply on one particular day does not change that.
At the same time, the later curve is offering a genuine opportunity to look beyond the next renewal. A longer contract may allow a business to blend today’s high prices with cheaper future periods, improve budget certainty and avoid making every decision against a short deadline. The right answer will depend on consumption certainty and risk appetite, but the long-term option should now be part of the conversation, not an afterthought.
This week, we will be watching the talks around Iran, President Xi’s US visit, any further impact on LNG expansion, the French strike position, and the UK’s wind forecast. We will also keep monitoring whether the value further down the curve remains available as those stories develop or begins to dwindle.
Thank you for listening. If you would like us to compare different contract lengths, explain the trade-offs, or test what the current curve could mean for your budget, please contact us at Smarta Energy.
Disclaimer
This market update is provided for general information only and reflects market conditions at the time of recording/publication. It should not be treated as financial, legal or procurement advice, or as a recommendation to buy, sell, fix or trade energy at any particular time. Energy markets can change quickly, and businesses should seek advice based on their own circumstances before making procurement decisions.
Copyright © 2026 Energy Live News LtdELN