The energy crisis has hit charge point operators

High gas prices are driving higher electricity prices as gas generators have to pay more. The whole market price rises as a consequence. This price is passed to business buyers of electricity including chargepoint operators particularly with the announcement from Osprey of a £1/kWh price on their charging networks.

In this blog post we are going to attempt to unpick this price and what is driving the higher prices.

• The higher wholesale energy prices directly contribute to the higher charge point prices that we see below
• Charge point operator margins are being squeezed – no additional profits are being taken
• Assuming prices follow the wholesale costs we believe prices will fall this winter to maybe as low as 55p/kWh (due to the Government cap if implemented to benefit charge point operators)
• Without a continuation of a wholesale price cap prices could rise back to 66-70p/kWh next summer.

Paua has taken the breakdown of costs published by Osprey in Summer 2021 and analysed these in light of recent price rises to both explain the current £1/kWh price as well as indicate where prices may go as a consequence of the Governments cap on wholesale electricity costs and into next year.

Chart below from Daily FX showing seasonal forward prices

Osprey announces £1/kWh – the breakdown

On the 15^th September Osprey announced that their prices had risen to £1/kWh. Previously the price had been £0.66/kWh and prior to this the price had been £0.42/kWh (Summer 2021).  In summer 2021 Osprey published some of its cost breakdown data and we have used this for the following analysis.

The wholesale electricity price for the winter of 22/23 was £715/MWh (Or 71.5p/kWh) (EEX data collected on 14^th September). In Summer 2021 the corresponding wholesale price was down at £48/MWh (LCCC) but with a clear trend towards a higher price of £102/MWh for the winter of 21/22 (both prices taken from LCCC baseload reference price).

When electricity is sold to a business customer there are a number of additional costs added before the wholesale price converts into a commercial electricity price. This includes a number of environmental levies and transmission and distribution fees. By using previous price information presented by Osprey we are able to calculate that this level of additional cost is around 12p/kWh.

If we make the assumption that the infrastructure costs (15p/kWh) remain the same then we can see that with the higher wholesale prices of 71p/kWh + an additional cost of 12p/kWh and infrastructure of 15p/kWh then there is about 2p/kWh of margin to get to £1/kWh.

So not surprisingly we find that the increased levels of wholesale electricity price has driven the pricing on the chargepoint operators networks up to these unprecedented level.

Great – so what next?

Recently Government announced a limited level of protection for business through the capping of wholesale prices that business would need to pay at around £210/MWh (21p/kWh). With the 12p/kWh of additional costs and 15p/kWh then we can expect prices to move to around 50-55p/kWh once you allow a few pennies for margin.

However we know that the price cap is not fixed forever as its only guaranteed 1^st October – 1^st April. Looking at the summer traded prices of electricity at around £374/MWh (37p/kWh from EEX again) we can see the potential for prices to rise again in summer 2023 to around 66-70p/kWh again.

Clearly none of the above is perfect foresight and predicting the future is challenging but it does look like there will be a drop in prices for a period. Throughout this we presume VAT remains the same at 20% although there are increasing calls for this to be reduced also (more on that another time!).

In the meantime simplify your VAT receipt process with a Paua EV charge card.

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