Energy glossary: Key energy terms explained

In the world of energy management, understanding specialised terms and acronyms is essential to understanding the context of the UK’s energy landscape. This is why we have created a comprehensive glossary of key energy terms relevant to the UK market:

Agreed capacity

Agreed capacity refers to the contracted capacity of gas or electricity that a supplier or consumer is entitled to use within a particular timeframe. These arrangements are crucial for ensuring reliable energy supply, managing peak demand, and optimising system efficiency while meeting contractual obligations.

Air source heat pump

A renewable heating technology that extracts heat from ambient air and transfers it indoors for space heating and hot water purposes. Air source heat pumps offer energy-efficient heating solutions and reduce carbon emissions.

Automatic Meter Readings (AMR)

AMR is a system that automatically collects consumption data from utility meters, such as electricity, gas, or water meters, and transmits it to utility providers for billing and analysis purposes.

American Petroleum Institute (API)

API is the national trade association that represents the American oil and natural gas industry.

Backwardation

This term refers to a situation where spot prices are greater than future process.

Baseload

The baseload is the delivery of the same amount of electricity in each half-hour period for each day of the contract.

BEIS (Department for Business, Energy & Industrial Strategy)

The BEIS is a UK government department responsible for implementing policies related to business, energy, climate change, and industrial strategy.

Bearish

This term refers to the situation when market conditions suggest that energy prices are going to fall.

Capacity market

The capacity market refers to a mechanism implemented by the UK government to ensure the availability of adequate electricity generation capacity to meet future demand and maintain grid reliability.

Commodity

A commodity is a raw material that can be bought and sold. Energy commodities include natural gas, electricity, crude oil, coal and even carbon.

Half hourly (HH) data

HH data refers to energy consumption data collected at half-hour intervals from metering devices equipped with half-hourly metering capabilities. HH data provides detailed insights into energy usage patterns, demand profiles, and peak load periods.

LNG

Liquid Natural Gas is often abbreviated in reports and documentation as LNG.

Local Distribution Zone (LDZ)

LDZ is a term for a geographic area served by a specific Gas Distribution Network operator (GDN) within the UK. LDZs play a vital role in gas distribution and supply chain logistics, facilitating the transportation of gas from transmission networks to end users.

Market Fundamentals

When the term market fundamentals is used, it is referring to the demand, costs, outages, supply and weather that drive the sentiment of the energy market.

Medium range storage

Medium range storage facilities and infrastructure designed to store natural gas for medium-term periods, typically ranging from several days to several weeks. Medium-range storage helps to balance gas supply and demand fluctuations.

MTM

MTM is the abbreviation of the term mark to market and refers to the weighted price if all unsecured volume was immediately hedged.

Non-LDZ

Non-LDZ refers to areas outside the jurisdiction of local gas distribution zones, typically served directly by the national gas transmission network. Non-LDZ regions may include remote or rural areas where gas distribution infrastructure is limited.

Renewable Obligation (RO)

Renewable obligation is a UK government scheme that incentivises the generation of electricity from renewable sources by requiring licensed electricity suppliers to source a specified proportion of their electricity sales from eligible renewable generators.

Smart meter

This is an advanced metering device that measures and records energy consumption data in real-time and communicate it remotely to utility providers. Smart meters enable consumers to monitor their energy usage more effectively and receive accurate bills.

UK National Balancing Point (NBP)

The UK NBP is a virtual trading hub for natural gas in the UK, where gas supplies are bought and sold based on market prices. NBP serves as a benchmark for gas pricing in the UK and is crucial for gas trading, supply agreements and market analysis.