Headlines:
- Gas and Electricity Wholesale prices are lower
- EU Gas Storage levels are an improved 92% full
- Markets are likely to overreact to any additional supply issues
Energy Overview
Since our last Energy Report, Gas and Electricity Wholesale prices are lower.
Costs for the remainder of 2022 and the first quarter of 2023 are very high. Although 2023 and 2024 show better value, there is still a considerable premium, but does provide an opportunity to contract longer and reduce the shorter term % increases. The government has introduced the Energy Bill Relief Scheme, which provides a reduced Wholesale cost to those non-domestic customers that have contracted from December 2021. This started in October 2022 and runs until March 2023, and maybe extended for specific industries. However, customers still need to monitor the markets for contracts from April 2023, when they may once again be fully exposed to costs.
The sabotage of Nord Stream 1 and 2 Gas pipelines did initially impact on prices despite neither of them being in operation. It has emerged that part of Nord Stream 2 could still supply Gas, but this is unlikely to be allowed by the EU as it was banned due to its perceived use as leverage against Europe in the Ukraine conflict. Countries across the continent are imposing measures to reduce energy use, and with EU Gas Storage now at 92% full against an upper target of 85% by November, and milder temperatures, there is a slightly more positive outlook.
Focus has turned to Electricity supply concerns for the winter, with the potential that Gas generators may not be supplied in the event of a Gas shortage and reduced levels from other sources. These include a large number of French Nuclear reactors being offline due to maintenance, safety concerns and strike action.
Wholesale prices remain extremely volatile with a great deal of uncertainty. Therefore, we would advise looking at your options for contracts ending in 2023, having conversations with Indigo Swan about your specific requirements.
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