1. Tough financial forces plus bad summer weather
appear to be determined to try and take charge
of the wholesale energy supply market.
Prices tumbled throughout the center of June to new lows. Annual gas prices are today 15%
lower than the same time last year, whilst yearly force costs fell to a two-year low and are 22%
down year-on-year.
Falling power costs dragged yearly spark spreads down 7% to £3.4/MWh, plus even that
reliable stalwart coal is having a difficult time of aspects, with slipping prices 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 regarding debt in the Eurozone
countries hasn't aided. Greece lurches from crisis to crisis plus even the election of the fresh
government is doing little to allay worries about its long-term future. But it's slowing financial
development in the US plus China that has certainly pushed international power markets
downwards. Brent Ameratex Energy Crude Oil tumbled to $97.6/bl, its lowest level because
January 2011, and yearly API coal dropped to a brand-new 20-month low of $95.4/t.
However, all of this is advantageous news for customers. While we will be missing out on which
'BBQ summer' the forecasters guaranteed you, both domestic plus commercial end-users have
enjoyed power costs drop in real terms. A fall inside inflation has moreover assisted to stabilise
the retail marketplace, yet the big difference has been at the pumps, where motorists have
finally started to see the numbers on the forecourts going down instead of up. This, combined
with lower electricity and gas fees, has provided the British economy a short respite, throughout
that it has a chance to push up creation and keep the delicate heart of UK PLC beating for a
while longer.
Ironically, it's been the biomass marketplace which has held the fort. Despite biomass contracts
dropping, with costs for 2013 down 1% to £88.5/t, prices are nevertheless about 6%
higher 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 assisted in no tiny measure with all the
approval of the plans for a 40MW staw-fuelled biomass plant inside Snetterton, Norfolk, that
have finally been given 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 after storm has
resulted inside a rise in UK gas demand. Supply peaked at 223.1mcm on 11th June, in the
center of the bad weather. Industry watchers believe that the unseasonably bad weather has
encouraged many people to do something they wouldn't normally do inside June - they turned
the heating up. The outcome was which though the national system decreased 0.1%, the
territorial system climbed 2.2%. To date, summer demand (calculated from April 1st) was down
7.8% on the nationwide program but 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,
expenditure by households and little companies has risen. This means which gas expenditure is
acting as a barometer for the productiveness of the UK economy plus whilst the big consumers
might be trying, homes and businesses are continuing to ride out the worst of the financial
storm, placing a more positive face on what has been a difficult few months.
How prices can fare in the next few weeks depends three points - the resolution (or otherwise)
of the Eurozone crisis, plus the financial condition of the US and China. If they begin to wobble
you may see prices commence to climb back up again.