As of the 2nd of May, Gas and Electricity Year Ahead Wholesale costs were lower, when compared to last month’s report.
The price of Oil fell from $85 a barrel to $75 but did reach $87 over the period. OPEC’s production cuts look to maintain a price in excess of $80 in order to provide funds for state finances. As other markets have closed to Russia, they continue to sell at a discount to the likes of India and China.
EU Gas Storage levels have a target to be 90% full by November 2023. They are currently 60% from 56% last month. There will be a focus through the warmer months to divert any excess Gas into Storage. Large numbers of LNG deliveries are still being made to Europe, compensating for the lower Gas flows from Russia, some of which are instead being diverted to China, which may reduce their future demand for LNG cargos.
As Gas is the main source of generation, the price of Electricity closely follows, despite the contribution from much cheaper Renewables. The growing diversity of supplies, which includes Nuclear and Hydro imports from the continent, aims to reduce the reliance on expensive carbon sourced generation such as Gas and Coal.
The Met Office forecast for May suggests temperatures in the region of seasonal norm.
The Energy Bills Discount Scheme (EBDS) replaced the Energy Bill Relief Scheme (EBRS) on the 1st of April 2023. It is designed to give all non-domestic customers, including the voluntary sector (such as charities) and the public sector (such as schools and hospitals) access to a phased in maximum discount when the customer’s wholesale cost exceeds the defined thresholds. This lasts for 12 months until 31st of March 2024 and applies to contracts that were put in place on or after 1st of December 2021 and non-contracted arrangements. Those companies that are classed as Energy and Trade Intensive Industries (ETII) will receive a more attractive discount once applied for. As with the EBRS, energy suppliers will automatically apply these standard discounts. Although the levels of assistance are lower and are based on a high wholesale cost, the price of Gas and Electricity is considerably lower than levels seen in 2022. Please see our Blog for more details.
From 1st of April there were further changes to the way some charges are calculated, under the Targeted Charging Review. This move is part of an attempt to recover more Electricity costs, such as Transmission and Balancing, through fixed charges, which will likely be seen on energy invoices as a higher Standing Charge. In theory this should give both the customer and the industry a more accurate way of managing finances.
Indigo Swan will be working closely with energy suppliers to help all our customers through this time of uncertainty
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 2nd of May, the Gas Year Ahead Wholesale cost was 126.79p/th, down from 139.82p/th in last month’s report and 39% less than 2022.
We are seeing little change to Wholesale prices, although there is a downward trend. The current price stability is largely due to a more positive outlook for Gas supplies in Europe this coming winter, as Storage levels are being filled, partially by large numbers of LNG deliveries. The 90% target by November looks to give confidence that when winter demand increases, there will be enough Gas in Storage to avoid supply issues.
With the greater dependency on LNG deliveries due to fewer Russian imports, should forecasts predict a very cold winter, this could start to impact on Wholesale prices. Russia may also decide to cut off the existing Gas supplies not already impacted by the closure of Nord Stream 1 and 2. If the Asian LNG price rises above that being paid by Europe, we may see shipments heading to the likes of China, as their economy is showing strong growth after COVID restrictions.
The EU has a Gas price cap linked to LNG which should help avoid a return to the high costs seen in 2022. Concern remains that an unexpected event, which has not been factored into costs, could once again see increases.
Energy suppliers are starting to offer a wider range of supply contracts so we would advise discussing your options for contracts ending in 2023 with Indigo Swan for both one and two years.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
On the 2nd of May, the Electricity Year Ahead Wholesale cost was £129.05/MWh, down from £145.60/MWh in last month’s report and 36% less than 2022.
The use of Gas for generation remained at 36% of supplies in April, the same as March, although the actual contribution was lower due to a reduced total demand. The improved weather did mean that Solar was higher, whilst Wind fell from 25% to 21%, which is forecast to be similar in May. This reliance on Gas to provide Electricity explains why the Gas and Electricity Wholesale markets are so closely linked.
In April the Electricity imports from the continent through the Interconnectors were lower than the very high levels seen in March. Imports are a useful source of additional supplies at times of peak demand, avoiding the use of more expensive fuels, such as Coal. There have been safety concerns with some French Nuclear generators. Although progress has been made to bring large volumes back online, required maintenance has been impacted by industrial action. This could restrict their exports to the UK.
The National Grid has mechanisms in place to help avoid power shortages and has taken additional steps to make 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 one and two years, for contracts ending in 2023.
Let us know if you would like us to research your options for 12, 24 and 36 month contracts.
If you enjoyed reading this blog why not try one of our others:
