Energy Market Update – January 2026

January caught a lot of businesses off guard. Wholesale gas prices jumped over 40% from early-month lows when cold weather arrived, storage levels dropped well below last year, and everyone started competing for the same LNG shipments. Power markets followed suit, day-ahead electricity briefly hit £120/MWh. It’s another reminder that UK business energy can swing hard and fast, throwing your budget plans out the window in a matter of days.

JANUARY IN REVIEW – WHY WHOLESALE PRICES MOVED

Weather and demand: January started mild, then turned cold mid-month. Temperatures dropped across the UK and Europe, which meant heating demand shot up. UK gas storage fell quickly, sitting at around 48% full by late January compared to 59% at the same point last year. Wind generation stayed low too, so the grid leaned heavily on gas-fired power stations. For four days straight during the coldest spell, gas supplied over half of Britain’s electricity.

LNG supply: The US kept pumping out record amounts of LNG, which helped stop European prices going through the roof. UK terminals received consistent shipments all month. But here’s the problem, Asia also faced cold weather, so they were bidding for the same cargoes. That tightened supply across the Atlantic. When freezing conditions in the US temporarily diverted some gas away from export terminals back to domestic use, European prices spiked again.

Norwegian pipeline flows: Norway kept sending us steady pipeline gas throughout January, supplying nearly 40% of Britain’s consumption. That’s the good news. The not-so-good news? The Norwegian Offshore Directorate warned in January that their production could start declining before 2030 unless they invest more in their fields. That adds some longer-term question marks about supply.

Storage levels: By late January, European gas storage had dropped to 47.6% full, down from 58.4% the year before. The UK’s limited storage capacity makes us particularly exposed when this happens. Withdrawals in January ran at their fastest pace in five years, which doesn’t leave much cushion if February stays cold.

Carbon and infrastructure: UK carbon allowances climbed 1.5% to average £68.43 per tonne as all that extra gas-fired generation pushed up emissions. The new Nuclear RAB (Regulated Asset Base) charges kicked in on 1 January at £3.46/MWh, adding another line item to business electricity bills. And TNUoS (Transmission Network Use of System) charges are still on track to nearly double when April arrives.

Bottom line: Day-ahead gas ended January around 73p/th (it actually dropped 7.5% in the final week but that was after surging much higher from early January lows below 50p/th). Day-ahead power finished at £76/MWh. Calendar 2027 gas contracts, the ones businesses look at for longer-term renewals, rose to 62.93p/th (up 0.2% in the final week after falling earlier in the month). Calendar 2027 power climbed to £71.86/MWh (up 2.1%). The really dramatic moves came in front-month contracts. February gas hit 86.75p/th (up 21% in one week) and February power reached £98.76/MWh (up 22%). Those are the kinds of swings that hurt if you’re caught renewing at the wrong moment.

HEADLINES YOUR BUSINESS SHOULD NOTE

Offshore wind auction smashes records (14 January): The government announced Allocation Round 7 secured 8.4GW of offshore wind capacity at around £91/MWh, the biggest single procurement the UK and Europe have ever seen. It unlocks £22 billion of private investment and will power up to 12 million homes once everything’s built and running.
New infrastructure policy fast-tracks grid projects (6 January): The Department for Energy Security and Net Zero published three updated policy statements to support Clean Power 2030. All new power lines and grid upgrades now get “critical national priority” status, which should speed up planning approvals that currently take years.
Ofgem wants to fix the grid connection mess (consultation runs until 27 February): Ofgem set out proposals to slash delays for connecting clean power generation, storage facilities, and industrial sites to the grid. Their review found developers waiting several years longer than promised, with some major projects losing tens of millions and seeing costs inflate by up to 200%.
£90 billion grid investment confirmed: National Grid announced a five-year investment programme to upgrade transmission networks. It’ll create a more reliable system but it also means higher standing charges and non-commodity costs hitting business bills from April onwards.

WHAT COULD MOVE PRICES IN FEBRUARY

What to watch	Why it matters	Likely effect on prices
Weather patterns and wind generation	Forecasters called for more cold from 26 January onwards; when wind stays low, the grid burns more gas to generate power	Prices likely to rise if cold weather hangs around; prices likely to fall if we get mild, windy conditions instead
European gas storage levels	Stockpiles sitting at 47.6% full (vs 58.4% last year); rapid withdrawals mean there’s not much buffer left if the cold spell extends	Prices likely to rise if storage keeps draining; prices likely to stay flat if weather warms up and refilling starts
LNG arrivals and US export capacity	Record US production has been capping prices so far; but Asian buyers are competing hard for the same cargoes	Prices likely to rise if US keeps gas at home or Asia outbids Europe; prices likely to fall if Atlantic supply stays strong
Geopolitical tensions	Ongoing situation with Ukraine, Middle East instability; US-EU trade friction affecting energy security	Prices likely to rise if we see supply disruptions or tensions escalate; prices likely to stay flat if diplomacy makes progress
April regulatory cost increases	TNUoS charges set to nearly double; Nuclear RAB levy jumping to £3.93/MWh from 1 April	Prices likely to rise for forward contracts as businesses factor in April’s cost increases ahead of renewals

WHAT THIS MEANS FOR YOUR ENERGY BUDGET

January’s price swings tell you everything you need to know about market risk right now. Gas up over 40%, front-month power up 22% within days. If you were on variable rates or your contract happened to end during that spike, your budget just took a serious hit. April’s bringing TNUoS charges that’ll nearly double, and European storage is sitting 11 percentage points below where it was last year. The potential for more shocks hasn’t gone away.

Fixing a competitive rate now means you know exactly what you’re paying for the next 12 to 36 months, regardless of what February throws at us or what April’s regulatory increases look like. The businesses that’ll weather 2026 best are the ones locking in fixed rates before the next surge catches them out.

HOW DYCE ENERGY TURNS INSIGHT INTO ADVANTAGE

Your challenge	How Dyce helps	Benefit to you
Markets swinging 20-40% in days makes it nearly impossible to time your renewal right	Our Yorkshire-based team watches markets daily and helps you lock in competitive rates before the next spike hits	You get budget certainty with rates fixed at the right time instead of panic-buying during a surge
April brings TNUoS charges that’ll nearly double plus rising Nuclear RAB levies, both will hit your bills hard	We offer 12 to 36-month fixed contracts that lock everything in now, before April’s increases land on your doorstep	You’re protected from April’s cost increases, your rate stays fixed no matter how much standing charges and levies climb
You’ve got sustainability targets but can’t afford to sacrifice budget control to hit them	We offer 100% renewable electricity and carbon-neutral gas backed by global offset projects, all on the same fixed-price terms as standard contracts	You hit your environmental goals without giving up budget certainty or paying premium variable rates
Switching feels like it takes forever when prices are moving this fast	Our digital process can get you switched and live on a new contract in as little as 48 hours, with our UK-based team supporting you the whole way	Fast protection from rising prices with proper support from our Yorkshire team whenever you need us

YOUR ACTION PLAN FOR FEBRUARY

Check your contract end-date now: If you’re up for renewal between February and April, fixing before April’s TNUoS increases could save you hundreds of pounds a year. Don’t leave it until the last minute when the market might have moved against you.
Tell us your target price: Let our team know what your budget can handle. We’ll watch the market for you and alert you when rates hit your target, taking the guesswork out of when to pull the trigger.
Have a look at green energy options: Ask about our 100% renewable electricity and carbon-neutral gas. A lot of businesses find our green tariffs are competitively priced against standard contracts, so you can hit sustainability targets without the budget taking a battering.
Get a quote with no obligation: Head to dyce-energy.co.uk/quote for pricing based on your actual consumption and location. Our quotes stay valid for a limited window whilst wholesale markets remain relatively stable, so now’s a good time to see where you stand.

Don’t let February’s volatility catch you unprepared. Get your quote sorted and lock in budget certainty before the next cold snap arrives.