Since our last Energy Report, Gas and Electricity Wholesale prices are higher.
Costs for the remainder of 2022 and the first quarter of 2023 are very high. Although 2023 and 2024 show better value, there is still a considerable premium, but does provide an opportunity to contract longer and reduce the shorter term % increases. Some energy suppliers are being very selective as to which contracts they will provide offers for.
The concern that Russia may further reduce or cut off Gas supplies to Europe, continues to create significant price volatility. EU Gas Storage levels have improved to 75% full against a target of 80% for November. They have introduced a 15% voluntary reduction in Gas use. Nord Stream 1 is still running at just 20% of capacity, with the reasons for restrictions being disputed. The US Freeport LNG plant that went offline in June, is now due to resume operations in October 2022, sooner than expected. It should provide valuable additional Gas this winter.
A more recent development has been the reduction in generation across Europe, due to the heat and dry spell. German power stations are struggling to access Coal due to low river levels and French Nuclear reactors have cooling issues. Norway potentially needs to preserve Hydro for the Winter and Solar panels are less efficient with higher temperatures. This means we are exporting large volumes of Electricity to Europe. Gas has contributed a very high 49% of generation so far in August, largely due to just 12% coming from Wind, the lowest in a year.
Gas and Electricity prices remain extremely volatile. Price direction will likely be led by Russia, meaning there is a great deal of uncertainty which way they will go. Therefore, we would advise looking at your options for contracts ending in 2022 and having conversations with your contact at Indigo Swan about your specific requirements.
