UK Energy Market Update January 2026: What Businesses Need to Know

As we move into 2026, UK wholesale energy markets have started the year with a modest increase in both gas and electricity prices, driven primarily by colder weather and reduced renewable generation.

Colder temperature forecasts during the first week of January increased demand expectations, while lower wind output reduced renewable supply. As a result, gas fired generation played a greater role in balancing the electricity system, leading to a short term firming in wholesale prices.

Electricity Market Overview

Wholesale electricity prices edged higher last week as near term fundamentals tightened. Increased demand from colder conditions, combined with reduced wind generation, resulted in greater reliance on gas fired power.

The twelve month electricity contract rose by around three percent week on week. Despite this recent uplift, prices remain well below levels seen earlier in 2025, supported by strong system margins, adequate supply conditions and healthy reserve capacity.

While near term prices have responded to weather driven changes, the broader electricity market remains relatively stable as we move through January.

Gas Market Overview

Wholesale gas prices also increased slightly over the same period. Colder conditions lifted gas demand for power generation, particularly as renewable output weakened.

The twelve month gas contract rose by just under two percent week on week. However, the wider gas market continues to benefit from healthy storage levels and stable import flows, which have helped limit further upward pressure on prices.

Longer term gas prices remain significantly below historical highs, reinforcing a broadly balanced outlook for the months ahead.

What This Means for Businesses

While recent price movements highlight how quickly energy markets can respond to changes in weather and renewable output, current supply conditions suggest a relatively steady outlook for early 2026.

For businesses, this underlines the importance of staying informed, reviewing contract positions regularly and understanding when flexibility or forward planning may be beneficial. Short term market movements can present both risks and opportunities, depending on individual contract structures and renewal timelines.

As energy markets continue to evolve, proactive engagement and clear advice can help businesses manage costs and reduce exposure to volatility throughout the year.

If you would like to discuss what the current energy market means for your business, or review your energy position for 2026, our team is happy to help.