Your AF Energy FAQs answered
We know energy bills are a concern for all our Members, whether you have your energy supply contract with AF or not.
We have gathered your frequently asked general energy questions. Here are our answers.
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Many factors have contributed to the increase.
When the pandemic ended, demand for all categories of goods escalated rapidly and supply chains struggled to restart. The resulting lack of supply began to push up prices. While supply chain disruption was driving up prices, energy supplies were unable to meet the dramatically increased demand and some key new energy sources failed to come online as expected. Then Russia invaded Ukraine and as Russia’s crucial role as a supplier of energy became clear, energy prices rose even further.
The outlook for electricity prices is extremely concerning.
All consumers and businesses will be severely impacted in the short and medium term. In many cases, electricity prices have tripled or quadrupled as a direct result of the wholesale energy market increases. Farmers who were locked into a fixed contract (which traditionally expire at the end of September) could see unit prices rise to over 90p/unit. But prices could also fall whilst they are locked into that high price.
Winter will be very tough as Russia attempts to hold the EU to ransom by withholding gas supplies. The electricity price is locked in with the price of gas. If the war in Ukraine ends, we will see some reduction but there will be no return to previous prices in the short/medium term. In the long term, governments have realised that reliance on Russian gas is unsustainable and alternative and local energy generation will be prioritised, but the impact will not be felt for several years.
It is hard to generalise.
Farms use electricity in diverse ways. But growers who rely on heating or cold storage will be dramatically affected. We have potato-growing Members whose electricity bills could increase from £150,000/year to over £550,000/year.
Finding a new supplier is now very difficult.
Many are refusing to take on new customers. Those that are taking on new supplies are often asking farmers to commit to longer contracts which price in the current meteoric increases and anticipate a longer-term reduction. This means prices might look more competitive in the short-term but could prove punitive in the medium to long term. The crucial questions are whether what we have now is a spike in prices and how long can the current situation continue?
Look at your cash flow and make a plan.
Quantify and understand the cost of your use of electricity to determine the impact on your business. Only when you understand the impact will you be in a position to take the correct action. There’s no point in only changing a few lightbulbs if the reality is that you need to reconsider whether or not to grow a crop that requires heat or cold storage.
Next, consider how power usage can be reduced and what alternative energy sources are available. Consider options for local energy generation although this may be a medium to long term solution.
On-farm renewable energy generation must be part of farmers’ strategy,
It will reduce cost of power in the long term but it’s not going make a difference in the next 6 months.
Farmers who are already generating renewable energy are better placed to cope with the current situation, especially if they are selling surplus energy back to the national grid. AF Members who have asked for our help to get better Power Purchase Agreements have got themselves in the strongest position.
Planning may become less restrictive as legislators incentivise local generation. In the very long term, the UK’s access to wind, shale gas, coal and oil means that we can be self-sufficient.