Key Headlines

Wholesale:

Wholesale gas and power contracts reversed recent trends and moved notably higher over the last two weeks, with many contracts hitting their highest levels since February. Gas prices were pushed higher by colder weather and a decrease in flows from Norway, whilst a large rise in carbon prices drove power prices upward.

15th April saw the price of carbon emissions hit their highest level since 2008 with this feeding directly wholesale power prices, whilst also supporting gas demand for power generation across Europe.

Looking ahead:

Wholesale gas and power contracts are expected to decrease over the next two weeks, with temperatures forecast to climb and power and gas demand dropping as a result. Additionally, gas and power supplies look set to remain comfortable in the coming weeks and months. However, rising commodity prices, in particular oil and carbon, may limit downward movements.

Third party charges and industry updates:

BEIS (Department of Business, Energy & Industrial Strategy) launched an energy efficiency competition for small and medium sized businesses, offering up to £6mn for solutions to encourage the take up of energy efficiency in the sector. BEIS also released its updated Energy and Emissions Projections (EEP) 2018, which projects energy supply and demand, energy prices and greenhouse gas emissions to 2035. It shows the UK remains off target to meet its fourth and fifth carbon budgets, with it increasing its forecast emissions from the business sector.

Wholesale Power and Gas

Power:

Seasonal power prices experienced large upward movements since the beginning of April. Power for delivery in winter 2019 jumped 13.5% to £60.8/MWh. Summer 20 power gained 12.7% to £51.5/MWh. Power prices were pushed higher by rising gas and carbon prices. Over the last two weeks, the price of EU carbon emission allowances has surged by almost €5.0/t, with prices ending last week at €27.0/t. This is the highest price since the end of September 2008 and is factored into the cost of power generation.

Gas: 

Similar to the power market, gas prices increased over the last fortnight with the greatest movement seen in the closer seasonal contracts. Winter 19 gas rose 14.3% to 58.4p/th and summer 20 gas climbed 11.4% to 47.9p/th. On 9 April, gas for delivery in winter 2019 hit its highest price since 21 February at 58.9p/th. On the same day, summer 20 gas reached 48.4p/th, its highest price since 7 February.

Third Party Charges and Industry Updates

BEIS launches SME energy efficiency competition

BEIS has launched a small and medium-sized (SMEs) businesses energy efficiency competition. Launched on 13 March, the Boosting Access for SMEs to Energy Efficiency (BASEE) Competition offers up to £6mn for innovative solutions that reduce transaction costs and encourage the take up of energy efficiency by SMEs in the commercial and industrial sectors. The competition is part of the government’s Clean Growth Strategy target of improving business energy efficiency by 20% by 2030. The closing date for applications is 8 May 2019.

UK still projected to miss fourth and fifth carbon budgets

BEIS published its Updated Energy and Emissions Projections: 2018 on Thursday 11 April, which projects energy supply and demand, energy prices and greenhouse gas emissions to 2035. The UK remains on track to miss the fourth and fifth carbon budgets, which aims to reduce emissions by 51% and 57% by 2025 and 2030 respectively on 1990 baseline levels. In the 2018 projections, coal capacity is predicted to be zero by 2023, while government has increased its forecast of renewables output across all years projected. Forecast greenhouse gas emissions from energy supply have been recorded as falling more steeply across 2019-2021 than the 2017 projections stated, and then showing a more gradual decline from 2022 onwards. However, emission from business were revised up compared with 2017, as detailed in Figure 1.

By OnlineDIRECT Marketing Team