Gas and Electricity Year Ahead Wholesale costs are lower than those in last week’s report. They remain significantly lower than most of 2021 / 2022 / 2023 but are comparable to 2024. Oil is unchanged at $67 a barrel.
There are still a number of global events that could impact on the cost of Gas, which will then also influence Electricity due to its use for generation. Both the EU and the US are looking at measures to penalise Russia and pressure them to negotiate a peace deal with Ukraine, but the US is hesitating due to their allies still buying energy from Russia. Any measures taken to restrict the sale of energy on the global market, has an impact on supplies and therefore costs. China is providing Russia with an outlet for its Gas via an existing pipeline (Power of Siberia), another which will proceed (Power of Siberia 2), and LNG shipments. In theory this should free up LNG supplies from other sources.
EU Gas Storage is 80% full compared to 93% last year. Unless there are unusually harsh conditions this winter or significant supply reductions, then supplies should be sufficient. As we move towards electrification, demand for Gas should start to decrease across Europe. The impact on the UK has been outlined by the recent forecast of Electricity Transmission costs, which pay for the investment to transport energy long distances and connect Renewable assets. This work is vital, but the costs that are being passed onto customers through bills are considerable.
The contribution of Wind to generation increased to 41% over the last week, which reduced Gas to just 17% and Imports via the Interconnectors to 14%.
We would encourage those with energy contracts ending in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
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