When you first begin looking deeper into how much you are spending on your business electricity, it is likely to cause some confusion. You will be bombarded with unfamiliar terms, the type you have forgotten about since your days sat in science class at school.
One such term is mWh, which stands for megawatt-hour.
This guide will examine electricity prices per MWh and explore the numerous factors that affect the UK’s energy market.
Find out moreWhat is a megawatt?
Before getting into the megawatt itself, it is important to understand the function of a watt. Simply put, the measurement of electricity is done in units of power, and these are known as watts. This is the scientific calculation:
P (watts) = Voltage (V) x Current (I)
This is a measurement of the amount of electrical energy featured in a circuit and the amount of electrical work which can be done by said circuit. A watt on its own, however, is not worth much. As you will know, lightbulbs – one of the least intensive electrical devices – use everything from 40 to 100 watts as standard.
This is why you will commonly see watts packaged as kilowatt (kW) and megawatt (mW). A kilowatt is 1,000 watts, while a megawatt is 1,000,000 million watts – or 1,000 kilowatts.
The reason why the world needs mW and kW is simple: electricity is a commodity. Due to the way businesses and households consume electricity, Energy suppliers deemed it necessary to work out the exact total of electrical energy used over a set period. This is why the megawatt-hour (MWh) exists.
What is a megawatt-hour?
The clue is in the name. As established already, a ‘megawatt’ is the equivalent of one million watts of electricity. The ‘hour’ is used to measure the electricity usage for, you guessed it, an hour.
Keep in mind the megawatt-hour power does not have to be used all within a single hour. For instance, it could be spread out across two hours if there is continual power usage at a rate of 0.5 megawatts (aka 500 kW). On the other end of the scale, it is possible to use two megawatts of power in the space of 30 minutes.
How much is one megawatt of electricity?
According to statistics, the average UK household utilises approximately 3,700 kilowatts each year. As a result, it should not come as a surprise that megawatts are usually restricted to certain organisations and industries.
For instance, large-scale power stations are typically used on the megawatt scale. It is an incredibly large amount of energy, after all. Just how large? Well, it is said that an mWh can provide about 330 homes with electricity for one hour.
What is the price of one megawatt?
Now it is time to answer this guide’s main question: How much does one-megawatt cost?
Sadly, there is no clear answer to give. Due to the unpredictable nature of the energy industry, unit prices change on a day-to-day basis. They sometimes even fluctuate by the hour. In general, you could be spending between £35 and £65 per mWh.
The market shifts due to the level of demand for energy from both businesses and domestic households. This can change because of the weather. During hot summer months, for example, there is a natural increase in air conditioning systems’ use to stay cool.
This is a similar story during the winter, as there is an upsurge in the use of heating solutions to battle cold spells. Appliances also continue to incorporate high kWh usage, which further contributes to the demand for energy.
While this guide could list the current mWh price, this is likely to be outdated after the first day of being published. A solution to this issue is by taking a look at the recent history of mWh and its general unit cost.
Analysing the past energy market
Throughout 2023, wholesale energy prices have experienced a decline, providing some relief to households and businesses across the UK. However, it’s essential to acknowledge that they remain higher than pre-energy crisis levels. Let’s review the key factors contributing to this increase:
- The invasion of Ukraine by Russia led Germany to suspend the transit of gas via the Nord Stream 2 pipeline. This pipeline, designed to double the annual capacity of Nord Stream 1 from 55 billion cubic meters (BCM) to 110 BCM, was impacted significantly.
- Russia took further measures by reducing the capacity of the Nord Stream 1 pipeline to 20% before completely ceasing the supply. Considering that Russia typically provides about 40% of Europe’s natural gas, this had a substantial impact.
- Recent updates confirm that this is when all reforms will start. All TNUoS charges will increase.
- Europe faced an exceptionally harsh winter, with freezing conditions in northern and central Europe. This led to a surge in gas usage and depletion of natural gas storage supplies.
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