As of the 2nd of September, Gas and Electricity Year Ahead Wholesale costs were higher than those in last month’s report.
Early August saw Wholesale prices continue July’s upward trend, as a number of factors combined to add price pressure. With what appeared to be improved positions mid-month, prices eased before once again moving higher. This underlines how unpredictable the energy markets currently are.
Tensions have risen in the Middle East with the potential to interrupt Gas and Oil supplies from the region, and Ukraine looks likely to end the Gas transit deal with Russia at the end of the year. High temperatures in parts of Asia have increased Gas demand for air-cooling, attracting LNG shipments and we continue to see planned and unplanned maintenance of Gas assets, impacting on both LNG and piped supplies.
EU Gas Storage levels have already exceeded the November target of 90% full, currently at 92% and likely reaching 100% before the higher winter demand begins, which is providing the industry with confidence. However, should there be more Gas disruptions, continued low LNG deliveries and a prolonged period of very low temperatures, then energy markets will likely show further volatility.
The energy industry has changed how it recovers Electricity Distribution, Transmission and Balancing costs, under the Targeted Charging Review. This has moved some charges away from being based on the energy used and billed in the unit rate, to fixed charges incorporated within the Standing Charge or as separate items. This should give both the customer and the industry a more accurate way of calculating budgets, but the change has become noticeable within energy bills and created concern. Over the next two years, there is a quite confused picture of increases and decreases in Transmission and Distribution charges, which energy suppliers will be billing customers.
From April 2024 most customers saw a decrease in Transmission which is likely to be followed by an increase in this fixed charge from April 2025, almost completely replacing what used to be recovered through Triads. Distribution costs are a little more complicated with the average fixed annual cost increasing across networks from April 2024 but decreasing from April 2025. Another element, the Available Capacity (AC), has already seen small increases but is due for a more significant rise from April 2025. This does mean that by managing the Agreed Supply Capacity, there is an opportunity to reduce the AC cost and longer term, potentially lower the Band which determines fixed charges.
Balancing costs were lower from April 2024, with increases expected from October 2024.
Indigo Swan works closely with energy suppliers to help all our customers understand and manage changes.
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 2nd of September, the Gas Year Ahead Wholesale cost was 100.55p/th, up from 99.56p/th in last month’s report and 19% less than 2023.
Recently there have been a number of disruptions to Gas supplies, some of which were planned, others not. Norwegian assets are undergoing maintenance and as they are now the largest supplier of Gas to Europe, any extended outages have an impact on prices. The EU Gas Storage target is 90% full by November, which has already been surpassed at 92% and will be used during the winter when heating demand is higher.
The upward price trend is due to a number of factors, some of which are concerns rather than actual events. Conflicts in Europe and the Middle East may reduce Gas supplies and Ukraine will likely stop Russian Gas being transported through its territory at the end of the year. Should these begin to impact on supplies then Europe will need to compete with Asia for LNG, adding to costs.
With Wholesale prices on an upward trend, there is little evidence that we will see a significant downturn. It is more likely that, as we saw in 2023, prices will continue to show low levels of volatility but avoid the price spikes seen in recent years. However, due to the tight global supply / demand relationship, any new event has the potential to impact on prices and so we would advise discussing your options for contracts ending in 2024 and early 2025 or at least monitoring the position closely.
On the 2nd of September, the Electricity Year Ahead Wholesale cost was £85.19/MWh, up from £83.79/MWh in last month’s report and 25% less than 2023.
The contribution of Gas to Electricity generation was just 18% in August, but reaching a high of 36% when Wind fell to just 6%. Gas continues to dictate Electricity’s price direction and so the potential issues of Gas supplies coming from Russia and the Middle East, maintenance of Norwegian assets and lower LNG deliveries as they head to Asia, are all impacting on the power price.
Despite a period of net Exports of Electricity via the Interconnectors with Europe due to their lower Renewables, they still contributed a high 16% net Imports in August and over the last week. These supplies from the likes of France, Norway, Denmark and Belgium, are largely sourced from Nuclear and Hydro, reducing our need to use as much Gas.
With Wholesale prices on an upward trend, there is little evidence that we will see a significant downturn. It is more likely that, as we saw in 2023, prices will continue to show low levels of volatility but avoid the price spikes seen in recent years. However, due to the tight global supply / demand relationship, any new event has the potential to impact on prices and so we would advise discussing your options for contracts ending in 2024 and early 2025 or at least monitoring the position closely.
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