Escalating energy prices
Care operators facing 100% increases in their energy bills have called for urgent government intervention to avoid closures.
On average, a care home with 50 residents spends about £50,000 annually on gas and electricity. The recent escalation in energy prices, driven by a trebling of wholesale 12-month gas contracts over the last five months could see some operators paying double that amount.
“The gas market has experienced high volatility especially for contracts over the winter period which has increased by nearly 300% since the start of the year.
This had been driven by curtailment in LNG supply to Europe, unseasonably cold weather and wind generation below seasonal normal in Q2 2021 leading to further reliance on gas which depleted storages to historic lows across Europe. This was exacerbated by curtailment in supply from the heavy Norwegian maintenance period and lower Russian gas flows into Europe in Q3 2021 after a fire at a gas condensate in the Yamal region causing gas flows to drop 70% into Mallnow and lack of additional transit capacity bookings by Gazprom. Furthermore, there was uncertainty over the Nord Stream 2 pipeline which could take up to another 6 months before becoming certified. Reduced gas and nuclear capacity, higher coal to gas fuel switching price and the extended outage of the IFA 1 interconnector caused by a fire creates tighter supply margins, keeping the outlook bullish for Winter.”
Jitesh Panchal, Market Analyst and Energy Trader at Trident Utilities
Executive chair of the National Care Association, Nadra Ahmed, said the energy price crisis “will make some providers feel they are unsustainable”.
It is a stark reminder of the volatility of a sector that is critically dependent on utilities. Melanie Weatherby, co-chair of the Care Association Alliance said many smaller operators signed up to energy firms that have already collapsed.
“Because care home gas use is so high it will be hard for them to find anyone else at a reasonable price and it might be that they can’t find anyone at all,” she said. “This is something the government needs to take into account in their negotiations with energy companies because you can bet they are doing that with hospitals.”
Operators are already facing a number of difficulties including staff shortages, high turnover rates, and dwindling occupancy rates. Unless public funding for care home beds is increased, it is becoming increasingly difficult for smaller care providers to run viable businesses. Many operators say they might be forced to make cuts to staff, entertainment, and maintenance to meet steeper bills.
Have you been affected by the recent surge in energy prices? Trident Utilities is an expert utility management specialist. Our experts work with a number of care home operators, helping them to adopt the most appropriate purchasing strategy and manage risk.
We can help take the strain off for future renewals and identify where savings can be made to help you avoid crippling price increases going forward. To find out how we can help you, please contact one of our experts.
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