1. Tough financial forces and lousy summer
weather seem to be determined to test and take
charge of the wholesale power supply
marketplace.
Prices tumbled throughout the middle of June to unique lows. Annual gas costs 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 energy prices dragged yearly spark spreads down 7% to £3.4/MWh, plus even
which reliable stalwart coal is having a hard time of things, 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 cost crashes? Well, concerns about debt in the Eurozone
nations hasn't assisted. Greece lurches from crisis to crisis plus even the election of a brand-
new government is doing small to allay worries regarding its long-term future. But it's slowing
financial development in the US plus China that has absolutely forced international energy
markets downwards. Brent Ameratex Energy Crude Oil tumbled to $97.6/bl, its lowest level
since January 2011, and yearly API coal dropped to a new 20-month low of $95.4/t.
But, all of the is superior news for customers. While you could be lost out on that 'BBQ summer'
the forecasters guaranteed us, both domestic plus commercial end-users have seen energy
costs drop in real terms. A fall in inflation has additionally aided to stabilise the retail
marketplace, nevertheless the big difference has been at the pumps, where motorists have
finally started to find the numbers on the forecourts going down instead of up. This, combined
with lower electricity and gas bills, has provided the British economy a short respite, during
which it has a chance to push up production plus keep the fragile heart of UK PLC beating for a
while longer.
Ironically, it's been the biomass market which has held the fort. Despite biomass contracts
dropping, with prices for 2013 down 1% to £88.5/t, costs are nonetheless 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 helped in no tiny measure with the approval
of the plans for a 40MW staw-fuelled biomass plant inside Snetterton, Norfolk, that have finally
been provided the go-ahead.
The real headline grabber throughout June and into July has been the atrocious weather the UK
has experienced. Lower than average June temperatures plus storm following storm has
resulted in a rise inside 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 several folks to do something they wouldn't usually do in June - they turned the
heating up. The outcome was which though the nationwide program decreased 0.1%, the
territorial system climbed 2.2%. To date, summer demand (calculated from April 1st) was down
2. 7.8% on the nationwide program however, up a staggering 31.1% found on the regional
program, compared to the same time last year.
What this indicates is the fact that whilst gas demand for force generation is down year-on-year,
usage by households and tiny companies has risen. This means which gas usage is acting
because a barometer for the productiveness of the UK economy plus while the big consumers
could be trying, homes plus businesses are continuing to ride out the worst of the financial
storm, putting a more positive face on what has been a difficult limited months.
How costs might fare inside the next limited weeks depends three details - the resolution (or
otherwise) of the Eurozone crisis, plus the economic condition of the US and China. If they
commence to wobble we might see prices commence to climb back up again.