1. Tough financial forces plus bad summer weather
appear to be determined to test and take charge
of the wholesale energy supply marketplace.
Prices tumbled throughout the center of June to unique lows. Annual gas costs are today 15%
lower than the same time last year, while yearly energy costs fell to a two-year low and are 22%
down year-on-year.
Falling energy costs dragged yearly spark spreads down 7% to £3.4/MWh, plus even
which reliable stalwart coal is having a difficult time of details, 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 cost 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 regarding its long-term future. However it's slowing
financial development in the US plus China that has truly pushed global power markets
downwards. Brent Tycoon Energy Crude Oil tumbled to $97.6/bl, its lowest level because
January 2011, plus yearly API coal dropped to a modern 20-month low of $95.4/t.
However, all of the is wise news for customers. While we may be lost out on which 'BBQ
summer' the forecasters promised you, both domestic plus commercial end-users have enjoyed
vitality costs drop in real terms. A fall in inflation has moreover helped to stabilise the retail
market, nevertheless 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 plus gas costs, has given the British economy a short respite, during which it
has a chance to push up creation and keep the fragile heart of UK PLC beating for a while
longer.
Ironically, it's been the biomass market that has held the fort. Despite biomass contracts
dropping, with prices for 2013 down 1% to £88.5/t, costs are nevertheless about 6%
higher than this time last year. They've recovered from their four-year low plus 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 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 following storm has
resulted inside a rise inside UK gas demand. Supply peaked at 223.1mcm on 11th June, inside
the middle of the bad weather. Industry watchers believe that the unseasonably bad weather
has encouraged various folks to do anything they wouldn't usually do inside 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
7.8% on the nationwide program but up a staggering 31.1% on the territorial program,
compared to the same time last year.
2. What this indicates is that whilst gas demand for force generation is down year-on-year, usage
by households plus tiny businesses has risen. This means that gas expenditure is acting as a
barometer for the productiveness of the UK economy plus while the big consumers can be
struggling, homes plus businesses are continuing to ride out the worst of the economic storm,
placing a more positive face on what has been a difficult limited months.
How prices might fare inside the next few weeks depends three things - the resolution (or
otherwise) of the Eurozone crisis, and the financial condition of the US plus China. If they start
to wobble you might see costs start to climb back up again.