Wholesale power and gas prices continued to decrease over the last two weeks, with seasonal contracts falling to levels not seen in over a year. However, lower gas prices were somewhat offset by an increase in the price of oil and carbon emission allowances, which prevented power prices from falling even further. Gas prices were pushed lower by healthy supply, amid numerous LNG deliveries and weak demand due to warmer than seasonal normal temperatures.
Gas supplies are expected to remain comfortable over the next two weeks following the completion of maintenance at Norwegian gas fields. Deliveries of Liquified Natural Gas into GB are also projected to continue, providing a comfortable gas supply outlook for the summer. An outage at the Heysham nuclear plant is scheduled to be resolved on 20 March. This will see 575MW of baseload generating capacity return, providing greater security of supply for the coming months.
Third party charges and industry updates:
On 7 March, government published its sector deal for offshore wind with the aim of producing a third of electricity from offshore wind by 2030. BEIS (The Department for Business, Energy and Industrial Strategy) said it will also reduce the cost of projects in the 2020s and overall system costs, so projects commissioning in 2030 will cost consumers less “as we move towards a subsidy free world”. There is currently 8.1GW of offshore wind capacity installed in the UK with a further 5.9GW already committed that is expected to be operational by 2023.
Wholesale Power and Gas
Seasonal baseload power contracts out to summer 2021 continued their recent downward movements over the last two weeks. A significant drop in gas prices fed directly into power prices. However, an increase in the price of carbon emission allowances prevented power prices from falling further. Power for delivery in summer 2019 fell 6.3% to £45.5 per MWh, while power for delivery in winter 2019 lost 5.8% to £55.0 per MWh.
Seasonal gas prices out to summer 2021 experienced significant losses. The summer 19 contract slumped 12.6% to 39.0p per therm and winter 19 gas declined 9.9% to 52.3p per therm. Comfortable gas supplies as a result of numerous LNG deliveries, and lower than normal demand due to higher than seasonal normal temperatures, continued to push gas prices lower.
Third Party Charges and Industry Updates
Government publishes Offshore Wind Sector Deal
On 7 March BEIS published its Offshore Wind Sector Deal, announcing that one-third of British electricity is set to be produced by offshore wind power by 2030. The deal will result in a new £250mn Offshore Wind Growth Partnership to increase UK competitiveness in turbine production, as well as increasing the sector target for the amount of UK content in homegrown offshore wind projects to 60%. BEIS also said that this deal will result in a predicted 70% of British electricity being produced from low-carbon sources by 2030 and over £40bn of infrastructure investment in the UK. BEIS said it will also reduce the cost of projects in the 2020s and overall system costs, so projects commissioning in 2030 will cost consumers less “as we move towards a subsidy free world”.
Government launches consultation on SME business energy efficiency scheme
As part of the Wednesday 13 March Spring Statement, Chancellor of the Exchequer Philip Hammond announced that BEIS had launched a consultation on a small and medium-sized enterprises (SMEs) energy efficiency scheme. BEIS has proposed three possible options for delivering the scheme. The first is a periodic energy efficiency auction based on competitive tenders. The second is a business energy efficiency obligation which would work in a similar way to the Energy Company Obligation. The third option is to expand access to finance options for SMEs through green loans or an energy service contract from an Energy Service Company. The consultation closes on 8th May.
By OnlineDIRECT Marketing Team