Since our last Energy Report, Gas and Electricity Wholesale prices are higher.
Costs for the remainder of 2022 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.
Russia has reduced Gas flows into Europe, claiming the need for maintenance, which is disputed by the likes of Germany. The result and likely intention has been to create a great deal of uncertainty and damage within the EU and the wider global economy. Following the ten-day shutdown of the Nord Stream 1 Gas pipeline, it resumed flows at 40% capacity. Russia has since announced this needs to be lowered to just 20%, which restricts the EU’s attempt to fill Gas Storage to 80% full by November. In response, EU members have agreed a 15% voluntary reduction in Gas use, which could become mandatory should the position deteriorate. Any cuts would look to protect the likes of domestic and hospital heating demand. Although the UK’s supply is more secure, our prices will reflect wider issues.
With Gas providing 44% of generation so far in July, Electricity prices have followed. The recent high temperatures created Electricity supply issues, with some French Nuclear reactors remaining offline due to safety concerns.
Gas and Electricity prices remain extremely volatile, with exaggerated upward reactions to smaller events. Price direction is largely in the hands of decision makers in the EU and Russia, which means there is a great deal of uncertainty which way prices will go. Therefore, we would advise looking at your options for contracts ending in 2022 and having conversations with your contact at Indigo Swan about your specific requirements.