Weekly UK Insight - 17 June 2019


p/therm 7 Jun 19 14 Jun 19 Change
Day-Ahead (DA) 28.50 29.30 2.8%
Jul 2019 28.59 28.31 -1.0%
Winter 2019/20 52.79 51.42 -2.6%
Summer 2020 45.12 44.13 -2.2%

Source: Reuters

The UK’s Day-Ahead gas price rose 2.8% to 29.30 p/therm, continuing a rebound from two-year lows for Britain’s spot gas prices as a spell of below seasonal normal temperatures has left the UK gas system around 15 mcm/d undersupplied.

National Grid’s forecast gas demand is expected at 227 mcm/d, above the seasonal normal demand of just 161 mcm/d.

Fortunately, planned maintenance at Belgium’s Zeebrugge import hub has resulted in some gas being re-routed from Europe to the UK. As a result, Norway’s Langeled pipeline has seen gas flows ramped up close to capacity of 74 mcm/d. The Zeebrugge outage is scheduled to continue until 24 June.

Meanwhile, we expect Medium Range Storage to be in injection mode for at least another week, reflecting the significant gas rerouting.

Winter 2019/20 gas prices fell 2.6% to 51.42 p/therm, driven lower by a comfortable long-term UK supply-demand gas balance, lower crude oil and European coal prices.

In addition, calls for the Dutch government to further slash gas output from the Netherlands’ Groningen province have failed to gain momentum following recent tremors.

Gas output is already scheduled to be cut from 19.4 bcm to 15.9bcm, but recent tremors meant that a few senior ministers had proposing to cap production at no more than 12 bcm.


Weekly UK Insight 17 June 2019
Source: Reuters


£/MWh 7 Jun 19 14 Jun 19 Change
Day-Ahead (DA) 34.66 38.87 12.1%
Jul 2019 39.13 39.25 0.3%
Winter 2019/20 56.28 55.68 -1.1%
Summer 2020 48.13 47.60 -1.1%

Source: Reuters

Day-Ahead power prices jumped 12.1% to £38.87/MWh responding to a decline in wind output forecasts for the coming week, and also supported by higher spot gas.

Winter 2019/20 power prices fell 1.1% to £55.68/MWh, reflecting losses in seasonal gas, oil, coal, and German forward prices.

Meanwhile, a previous unplanned outage at EDF’s Hinkley Point B-7 nuclear reactor had been expected to reduce the grid’s power capacity by 480MW for several weeks. However, the reactor is now back online and full operational. This means that the only UK nuclear units currently offline are all planned maintenance.


Weekly UK Insight 17 June 2019
Source: Reuters


$/bbl 7 Jun 19 14 Jun 19 Change
Brent Crude Aug 19 63.29 62.01 -2.0%

Source: Reuters

Brent crude oil prices fell to their lowest weekly close since January, falling 2.0% week-on-week to $62.01/bbl, as economic concerns outweighed tensions over attacks on two oil tankers in the Gulf of Oman.

The International Energy Agency (IEA) is projecting weaker oil demand growth in 2019, citing worsening prospects for global trade. Today, oil markets are having to digest more demand concerns as India implemented retaliatory tariffs on a number of U.S. goods yesterday,

Meanwhile, though danger of an immediate confrontation over last week’s tanker attacks – which the U.S. blamed on Iran but Tehran denied – appeared to recede, tensions over the strategic route remain high. A fifth of the world’s oil passes through the Strait of Hormuz.


Weekly UK Insight 17 June 2019
Source: Reuters

Exchange Rates & Economics

£/$ 7 Jun 19 14 Jun 19 Change
GBP/USD 1.2734 1.2590 -1.1%

Source: Reuters

The value of the Pound Sterling continued trading close to a five-month low versus the U.S. dollar and euro as pressure mounts from Brexit uncertainty and the Tory leadership race.

Additionally, attempts by the Labour party to introduced legislation aimed at blocking a ‘no deal’ Brexit failed. The House of Commons voted 309 to 298 to reject the motion, even after a number of Conservative Party MPs rebelled against the Government. The Conservative rebels were countered by Labour Party rebels who voted with the government, or instead opted to abstain.

China’s industrial output growth fell to the lowest level in 17 years, as the world’s second largest economy has been hindered by ongoing trade tensions with the U.S.


Weekly UK Insight 17 June 2019
Source: Reuters

Regulatory and Market News

T-1 Capacity Market auction for Winter 2019/20 clears at £0.77/kW

The T-1 capacity auction for delivery this winter has cleared at a record low price of £0.77/kW. Some 129 units have been awarded an agreement, totalling 3.6GW of capacity. Four years ago the auction paid a much higher price, £18/kW, for 46GW of capacity for this same winter.

By volume, reciprocating engines (gas recips) took the largest number of agreements (19 to existing engines, 26 to new build); CHP took the largest number of agreements (29 existing plants and one new build).

The auction results do not make great reading for demand-side response (DSR), with swathes of units from E.on, EDF, Enel X, Flexitricity, Grid Beyond, Kiwi Power, Scottish Power, Smartest Energy and UK Power Reserve dropping out as the price plummeted.

Some 29 DSR agreements for around 200MW were awarded to DSR providers, with Limejump taking just over half of them.

The clearing price was also a turnoff for storage, with just 6 projects, totalling 22MW, taking agreements.

The Capacity Market is currently suspended following a legal challenge by Tempus Energy that was upheld by the European Court of Justice.

The government hopes to reinstate the market this year or next.

LINK: National Grid – T-1 2019/20

SSE announced planned closure of Fiddler’s Ferry coal-fired power station by 31 March 2020

Energy supplier SSE has announced that it plans to close its last coal-fired power plant, Fiddler’s Ferry, by 31 March 2020.

The company has been mulling the decision for several years as Fiddler’s Ferry became increasingly reliant on ancillary services to make revenue. It said the power station’s ‘limited success’ in the capacity market and ongoing heavy losses made up its mind.

Stephen Wheeler, managing director of Thermal Energy at SSE, said the station was “unable to compete with more efficient gas and renewable generation”.

Following EDF’s earlier decision to close its Cottam coal plant in September 2019, SSE’s decision will leave just five coal plants operational across the UK: Drax units 5&6 (1.3GW), Ratcliffe on Soar (2.0GW), West Burton A (2.0GW), Aberthaw B (1.6GW) and Kilroot (0.5GW)

Coal is often blamed as the biggest culprit in terms of historical carbon dioxide emissions in the UK, but it now accounts for less than 10% of UK power output. All coal generation is set to come off the UK system by 2025.

LINK: SSE – Fiddler Ferry coal plant to close 2020


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