Headlines:
- Gas and Electricity Wholesale prices are lower than last week
- EU Gas Storage levels are a very high 97% full
- Global events may create further price volatility
Energy Overview
Gas and Electricity Wholesale costs are lower than last week.
There has been a small reduction in EU Gas Storage levels which are now 97% full, still far higher than expected towards the end of November, which has meant that LNG shipments are down, with the assumption they will increase with demand. The amount of Storage is a key price driver as less Russian Gas is available through the winter. There is also the possibility of the Groningen Gas field, which closed in October, being made available in the event of a supply emergency.
Over the last week, Gas has provided the most generation at 34%, meaning Electricity prices track Gas very closely. The contribution of Wind was up slightly at 29%, whilst Interconnectors provided 11% compared to just 6% last November, which is partly due to the availability of French Nuclear power and Hydro from Norway. We are again seeing the use of the Demand Flexibility Service, where customers will be paid to reduce their Electricity consumption on request at peak times. Mechanisms such as this, remove some of the strain on the network and hopefully avoids the use of Coal generation, which will close in the UK from 2024 and in recent years has been used as a tool to balance the network. Government schemes aim to prevent tight supply margins, high prices and power cuts.
There is the potential that any event that impacts on the confidence in the delivery of energy supplies to meet demand could have a big impact on prices this winter. To manage risk, Indigo Swan are advising customers with contracts that end in 2023 and early 2024, to engage with us to review their positions.
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