As of the 4th of December, Gas and Electricity Year Ahead Wholesale costs were lower than those in last month’s report.
The recent spell of colder weather across Europe has meant that EU Gas Storage levels are now 94% full compared to almost 100% last month. The target level for 1st of November was 90%, so the position is still better than had been expected. This is providing a more optimistic outlook for supplies which is reflected in Gas Wholesale costs. The conflict between Israel and Hamas has yet to have a significant impact on Gas and Oil supplies, but there remains the potential for disruption to LNG shipments leaving the region, which have been a vital replacement for reduced Russian Gas flows.
Gas is the main method of Electricity generation, despite the growing diversity of supplies, such as renewables and connections to the continent. Due to the lack of reliability of Wind and Solar, and not currently being able to store Electricity on any great scale, Gas generation will continue to dictate prices.
The Met Office forecast for December suggests temperatures are likely to be in the region of seasonal norm for much of the month, although it could turn colder towards the end.
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 scheme 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. As with the EBRS, energy suppliers will automatically apply these standard discounts. The levels of assistance are less generous, but the price of Gas and Electricity is considerably lower than 2022. Those companies that are classed as Energy and Trade Intensive Industries (ETII) and Heat Networks, had to apply in July 2023 to receive a more attractive discount.
Customers may have started to see higher Standing Charges on their Electricity invoices from 1st of April 2023. There have been changes to the way some industry 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 fees. In theory this should give both the customer and the industry a more accurate way of managing finances.
Indigo Swan are working closely with energy suppliers to help all our customers understand and manage these changes.
Please contact us on 0333 320 0475 to discuss options or to get a latest update.
On the 4th of December, the Gas Year Ahead Wholesale cost was 103.26p/th, down from 120.41p/th in last month’s report and 70% less than 2022.
The lower Wholesale cost is despite the recent period of cold weather and EU Gas Storage levels falling from almost 100% full to 94%, which is still very high for the time of year. Should temperatures fall below seasonal norm for a prolonged period, then lower Storage levels will be factored into prices. Compared to most European nations, the UK has little Gas Storage capacity despite our heavy reliance on it.
LNG has been vital for Europe as it looks to replace supplies from Russia, which have been significantly reduced, with the risk they could be even further. The likes of Germany have added LNG infrastructure, as last year the UK acted as a hub to receive and distribute Gas to the mainland through interconnectors.
Deliveries of LNG are down, but we would expect them to resume as demand increases. There is a concern that should the conflict between Israel and Hamas spread within the region, that LNG and Oil shipments could potentially see restrictions using the Strait of Hormuz. Supplies from Qatar would be impacted, increasing demand for deliveries from the likes of the USA and Australia.
We would advise discussing your options for contracts ending in 2023 or early 2024 with Indigo Swan.
On the 4th of December, the Electricity Year Ahead Wholesale cost was £93.65/MWh, down from £104.56/MWh in last month’s report and 73% less than 2022.
As expected, in November Electricity demand increased, although was still lower than last year, which is a pattern we have seen through 2023. This could be due to a number of factors, but is likely the continued efficiencies made to help meet carbon reduction targets and reduce energy costs.
Gas provided 34% of generation, down from 40% in November 2022. In recent days with Wind at just 4% and a high Electricity demand, Gas accounted for 60% over a 72-hour period. Until Electricity can be stored on a large scale then Gas will continue to dictate price direction, especially with the move towards the electrification of heating and transport.
As transmission charges are now mostly recovered through fixed fees rather than the time of use Triads, this reduces opportunities to incentivise the reduction of peak demand. Triads have indirectly been replaced by the Demand Flexibility Service (DFS), which pays both domestic and business customers to reduce consumption on request, helping avoid strain on the network.
Let us know if you would like us to research your options for contracts ending in 2023 or early 2024.
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