As of the 15th of November, Gas and Electricity Year Ahead Wholesale costs were lower, when compared to last month’s report. Oil is higher at $94 per barrel, from $88, as OPEC+ takes measures to keep the price inflated.
Nord Stream 1 and 2 pipelines are unlikely to provide Gas this winter. Therefore, it is a significant positive that EU Gas Storage levels have been filled almost to capacity. This is the result of measures taken to reduce consumption, milder temperatures, the sourcing of supplies from elsewhere and an influx of LNG deliveries. However, there could still be shortages this winter in the event of a long cold spell and further supply disruptions.
Electricity prices closely follow Gas costs, due to its use for generation. In the event that there were Gas supply issues this winter, all available methods of generation would be explored, and measures taken to encourage consumers to reduce demand at peak times. Coal power stations are being made available to balance the system in the event of shortfalls, as we cannot rely on imports from Europe, where their own issues include, over half of French Nuclear reactors being offline.
The Met Office forecast suggests we will generally see seasonal norm temperatures for the remainder of November with periods of strong winds.
The government’s, Energy Bill Relief Scheme, is providing assistance for non-domestic customers from Oct 2022 until March 2023, and being reviewed, with the option to extend it for targeted industries. This means that companies will not be fully exposed to the very high winter prices. If a contract was entered from December 2021 (previously April 2022), a Wholesale price cap of 21.1 p/kWh for Electricity and 7.5 p/kWh for Gas will be applied. The key point is that this is just Wholesale and so all other charges that make up an energy bill will be added. Those that are not contracted during the six months and choose to be exposed to supplier’s non contracted rates, will receive a Maximum Discount from the Wholesale cost of 34.5 p/kWh and 9.1 p/kWh. This could mean that the price paid is greater than that of the price cap. Energy suppliers are updating their billing to automatically incorporate these changes. The advice being given is to contract for this period and also look at contract options from April 2023.
Over the next year, the way some charges are calculated will change, under the Targeted Charging Review. Energy suppliers can choose whether to fix Electricity contract costs, pass them through or leave that decision until a later date. This does allow for the possibility of a review of the Transmission and Balancing charges in some fixed price Electricity contracts, as the pricing method is due to change from April 2023.
Indigo Swan will be working closely with energy suppliers to best help all our customers through this worrying time.
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 15th of November, the Gas Year Ahead Wholesale cost was 307.61p/th, down from 452.17p/th in last month’s report and 155% higher than 2021. Prices for 2023 and 2024 are lower.
The EU focused attention on building up Gas Storage levels before the start of the winter, which was thought even more challenging after Nord Stream 1 was sabotaged. With Storage levels currently at 96% full, this does give the industry some hope of avoiding supply issues, although if Russia did cut off other flows into Europe and if there was a prolonged cold spell, the EU may need to take additional measures to reduce demand.
The UK has a very low Gas Storage capacity compared to other European countries. Although full, events have highlighted the need to open the larger Rough Storage facility, which was closed in 2017 due to economics. Approximately 20% of Rough is now operational and is being filled, potentially for use later this winter. We continue to see large numbers of LNG shipments arrive, partly due to the lower demand from Asia, as China puts more cities into lockdown. There are renewed concerns that the US Freeport LNG facility will not be able to resume shipments in November, following the fire in June. Reports suggest this could now be early 2023.
The contribution of Gas for generation fell in October to 39% from 46% in September, largely due to improved Wind. This reduces the burden on Gas supplies and helps reduce prices.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
On the 15th of November, the Electricity Year Ahead Wholesale cost was £301.24/MWh, down from £467.27/MWh in last month’s report and 147% higher than 2021. Prices for 2023 and 2024 are lower.
Electricity prices closely follow Gas due to it being the main source of generation, although Gas only accounted for 39% in October from 46% in September and has fallen further to just 33% so far in November. This has been the result of a consistently high contribution of wind, frequently providing 40% of daily supplies.
The ongoing concern is, if there were further disruptions to Gas this winter, then Electricity generation may be restricted. We would normally look to France and the wider continent for Imports during peak periods of demand, but due to the closure of almost half of French Nuclear reactors and other issues, that is less reliable
The National Grid has mechanisms in place to help avoid power shortages and has taken additional steps to make Coal generation available on demand. These measures do come at a cost premium, in the form of higher third-party charges within bills, but provide an element of stability to prices which otherwise may react even more dramatically.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
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