Key Headlines

Wholesale:

All seasonal power and gas contracts increased during the last two weeks, with many contracts hitting multi-month highs.

Power and gas contracts were driven higher by rising commodity prices, as the cost of carbon allowances gained 9.9% to €28.4/t. Carbon prices peaked at an 11-year high of €29.2/t on 16 July. Higher oil prices also supported seasonal gas contracts after jumping to $67.0/bl on 15 July, amid increased tensions in the Middle East.

Looking ahead:

Gas supplies are expected to be comfortable over the next two weeks amid weaker summer demand. In addition, the return of nuclear capacity will provide increased security of supply for power. These factors will act to push near-term prices lower and also feed through into seasonal contracts. However, commodity price movements will continue to be the main driver for seasonal contracts, with the price of carbon emission allowances expected to rise further.

Third party charges and industry updates:

National Grid ESO issued its Future Energy Scenarios report on Thursday 11 July, setting out credible pathways and scenarios for the future of energy. Whilst a net zero emissions target by 2050 is achievable, the report highlights that it requires immediate action and the need for greater coordination across the whole energy system, with digitisation and data becoming a critical enabler.

Wholesale Power and Gas

Power:

All wholesale power contracts increased over the last two weeks. Power for delivery in winter 2019 experienced the greatest gains, rising 7.4% to £58.0/MWh. Summer 2020 power climbed 6.5% to £50.7/MWh.

During the last fortnight, winter 2019 power rose to its highest price since the end of January and the summer 2020 contract hit its highest level since mid-December 2018.

Gas: 

All gas contracts also moved higher with the winter 2019 contract jumping 9.6% to 53.1p/th. Summer 2020 gas rose 8.0% to 46.9p/th. Further to rising commodity prices, a reduction in LNG deliveries and increased gas demand for power generation acted to push prices higher.

Similar to the power market, gas contracts hit new highs with winter 2019 gas reaching a three-month high and summer 2020 gas hitting at six-month high.

Third Party Charges and Industry Updates

Ofgem publishes strategic narrative for 2019-23

On Thursday 11 July, Ofgem outlined its three key objectives to guide its approach for the next four years in its Strategic Narrative. The objectives will aim to help carry out Ofgem’s principal duty to “protect the interests of existing and future consumers”. They mean that stakeholders and consumers should expect Ofgem to: enable competition and innovation which drives down prices and results in new products and services; protect customers, especially those in vulnerable circumstances through stamping out sharp practice and ensuring fair treatment; and decarbonise to deliver a net zero economy at the lowest costs to consumers.

National Grid ESO 2019 Future Energy Scenarios published

National Grid ESO issued its Future Energy Scenarios report on Thursday 11 July, setting out credible pathways and scenarios for the future of energy. Whilst net zero by 2050 is achievable, the report highlights that it requires immediate action and the need for greater coordination across the whole energy system, with digitisation and data becoming a critical enabler. The analysis predicts 35mn EVs to be on the road by 2050, which can be used to store roughly one-fifth of GB’s solar generation. The report highlights that UK homes and businesses will need to transition to hydrogen and electric technologies for heat. For Net-Zero, electrification is greater than in any core scenario, mainly due to greater electrification of the industrial and commercial sector.

Breakdown of Third Party Charges on the electricity and gas bill for 2019-20