Tough economic forces and poor summer weather have pushed wholesale power prices lower. Annual gas and electricity prices are down 15-22% from last year due to falling global energy demand and prices. Biomass prices have held steady and are slightly higher than last year due to a new biomass plant approval. Unusually cold and stormy June weather in the UK has increased gas demand from households and small businesses compared to last year. Future price movements will depend on resolutions to the Eurozone crisis and economic conditions in the US and China.
BP Statistical Review World Energy 2019: Full report
Falling energy prices provide brief respite for UK economy amid tough financial forces and bad weather
1. Tough financial forces and bad summer weather
seem to be determined to try and take charge of
the wholesale power supply market.
Prices tumbled throughout the center of June to fresh lows. Annual gas prices are today 15%
lower than the same time last year, whilst yearly force costs fell to a two-year low plus are 22%
down year-on-year.
Falling force prices dragged yearly spark spreads down 7% to £3.4/MWh, and even that
reliable stalwart coal is having a difficult time of aspects, with slipping costs buffering the fall of
dark spreads slightly to a £17.9/MWh premium to spark spreads.
So what's been setting off these price crashes? Well, concerns about debt in the Eurozone
countries hasn't aided. Greece lurches from crisis to crisis plus even the election of the modern
government is doing small to allay fears about its long-term future. However it's slowing financial
development inside the US and China that has absolutely pushed global stamina markets
downwards. Brent Tycoon Energy Crude Oil tumbled to $97.6/bl, its lowest level because
January 2011, plus annual API coal dropped to a hot 20-month low of $95.4/t.
However, all of this is wise news for consumers. While you could be lost out on that 'BBQ
summer' the forecasters promised you, both domestic plus commercial end-users have enjoyed
energy costs drop inside real terms. A fall inside inflation has also aided to stabilise the retail
market, however, the big difference has been at the pumps, where motorists have finally started
to see the numbers found on the forecourts going down instead of up. This, combined with
lower electricity and gas costs, has given the British economy a brief respite, throughout which it
has a chance to push up production and keep the delicate heart of UK PLC beating for a while
longer.
Ironically, it's been the biomass marketplace that has held the fort. Despite biomass contracts
dropping, with prices for 2013 down 1% to £88.5/t, costs are nevertheless around 6%
high than this time last year. They've recovered from their four-year low and are at their highest
level for five months. This boost has been helped in no small measure with the approval of the
plans for a 40MW staw-fuelled biomass plant in Snetterton, Norfolk, which have finally been
provided the go-ahead.
The real headline grabber throughout June plus into July has been the atrocious weather the
UK has experienced. Lower than average June temperatures plus storm following storm has
resulted inside a rise inside UK gas demand. Supply peaked at 223.1mcm on 11th June, inside
the center of the bad weather. Industry watchers believe that the unseasonably bad weather
has encouraged countless persons to do something they wouldn't usually do in June - they
turned the heating up. The result was which although the national system decreased 0.1%, the
regional system climbed 2.2%. To date, summer demand (measured from April 1st) was down
7.8% on the national system yet up a staggering 31.1% on the territorial system, compared to
the same time last year.
2. What this indicates is that whilst gas demand for energy generation is down year-on-year,
consumption by households and tiny companies has risen. This means that gas expenditure is
acting because a barometer for the productiveness of the UK economy and whilst the big users
may be trying, homes plus companies are continuing to ride out the worst of the economic
storm, placing a more positive face on what has been a difficult few months.
How costs usually fare in the upcoming few weeks may depend on three factors - the resolution
(or otherwise) of the Eurozone crisis, and the financial condition of the US plus China. If they
start to wobble we can see prices begin to climb back up again.