Key Headlines

Wholesale:

Power and gas contracts showed mixed movements over the last two weeks, although price changes were fairly small. Comfortable gas supplies continued to put pressure on prices; however, rising oil and carbon prices countered these movements considerably. Brent crude oil prices rose 4.1% to $65.1/bl, amid rising tensions between the US and Iran.

Looking ahead:

Both power and gas demand is forecast to fall in the coming weeks as temperatures increase, whilst gas supplies are expected to remain healthy with continued strong LNG deliveries to GB. This will provide further downward pressure to seasonal gas and power contracts.

However, oil and carbon prices are likely to rise with oil finding support from tensions in the Middle East, while demand for carbon allowances are projected to inflate amid an expected increase in thermal generation on the Continent.

Third party charges and industry updates:

The T-1 Capacity Market auction for delivery in 2019-20 cleared at £0.77/kW, the lowest clearing price ever achieved in a GB capacity auction. The auction was originally scheduled for early 2019 but was delayed due to the European Court of Justice decision to suspend the Capacity Market.

Business in the Community launched the Net Zero Carbon Taskforce aiming to identify the simplest, most effective actions businesses can take to help reduce the climate breakdown.

Wholesale Power and Gas

Power:

Seasonal power contracts were little changed over the last two weeks. Winter 19 power decreased by just £0.4/MWh to £55.4/MWh. Prices did drop below £55.0/MWh in the interim, before rising in reaction to EDF’s announcement that the Hunterston nuclear plant will remain offline until at least October. Power for delivery in summer 2020 rose 0.8% to £48.1/MWh.

The price of carbon emission allowances rose 2.8% to €25.0/t, providing some upward momentum to power prices.

Gas: 

All seasonal gas contracts decreased with the winter 2019 contract experiencing the greatest movements. Winter 19 gas dropped 2.2% to 50.9p/th. The contract was pushed lower amid expectations of comfortable gas supplies with numerous LNG cargoes scheduled to arrive in GB and Europe in the coming weeks.

Third Party Charges and Industry Updates

T-1 Capacity Market auction clears at £0.77/kw

The T-1 Capacity Market auction for delivery in 2019-20 cleared at £0.77/kW, the lowest clearing price ever achieved in a GB capacity auction. The auction began on Tuesday 11 June and cleared on Wednesday 12 June. In total 3,626.196MW of capacity secured Capacity Agreements, which represented 38.49% of the 9,420.357MW of capacity that entered the auction. The auction was originally scheduled for early 2019 but was delayed due to the European Court of Justice decision to suspend the Capacity Market. All of the agreements are subject to State aid being approved for the scheme.

Net zero carbon taskforce launched to help companies play role in 2050

Business in the Community (BITC) has launched the Net Zero Carbon Taskforce. Announced on 12 June, the taskforce’s mission is to “inspire and mobilise businesses to reverse the impacts of the climate crisis”. It aims to identify the simplest, most effective actions businesses can take to help reduce the climate breakdown. Gudrun Cartwright, Environment Director at Business in the Community, said: “While Business in the Community endorses this target, 2050 may be too late according to current science-based predictions. UK cities are committing to earlier targets such as Glasgow’s target to achieve net zero carbon by 2045, Manchester by 2038, Edinburgh and Bristol by 2030 and Nottingham by 2028.”.

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