Weekly UK Insight - 23 September 2019


p/therm 13 Sep 19 20 Sep 19 Change
Day-Ahead (DA) 30.00 25.40 -15.3%
Oct 2019 38.15 33.30 -12.7%
Winter 2019/20 49.51 49.02 -1.0%
Summer 2020 44.52 46.07 3.5%

Source: Reuters

The UK’s Day-Ahead gas price fell 15.3% to 25.40 p/therm as warmer temperatures and news that EDF did not expect issues with nuclear components to result in any outages both contributed to lower demand forecasts.

On the supply side, UK terminals could receive as many as nine LNG cargoes within the next two weeks. As a result, LNG send-out is strong at 35 mcm/d.

These deliveries are helping to fill the void left by summer maintenance outages at Norway’s Troll and Orman Lange gas fields. Britain’s Easington terminal is also shut down for planned maintenance until 24 September. As a result, Langeled pipeline flows remain at zero.

Winter 2019/20 gas prices slid 1.0% lower week-on-week to 49.02 p/therm, as the risk of major nuclear outages in the UK or France seems to have been averted meaning that UK gas demand for power production should remain in line with seasonal normal averages over the next six months.

European gas storage remains extremely full for this time of year, hovering around 96% of its maximum storage capacity. However, the Winter 2019/20 contract delivers in just 7 days, meaning that lots of customers will be looking to lock in their volume, potentially driving prices higher for the coming week.

Further out, Summer 2020 gas prices recorded a 3.5% increase reflecting gains in global crude oil markets. Although oil output is expected to return to normal in the short term, escalating geo-political tensions in the Middle East could pose a disruptive supply risk for LNG and oil to Europe.


Weekly UK Insight 23 September 2019
Source: Reuters


£/MWh 13 Sep 19 20 Sep 19 Change
Day-Ahead (DA) 36.91 29.02 -21.4%
Oct 2019 46.50 42.79 -8.0%
Winter 2019/20 54.98 54.28 -1.3%
Summer 2020 48.99 49.87 1.8%

Source: Reuters

Day-Ahead power prices fell 21.4% to £29.02/MWh, responding to lower gas prices and stronger wind output.

Winter 2019/20 power prices slid 1.3% to £54.24/MWh, tracking lower winter gas, as EDF’s announcement that they did not anticipate any nuclear outages, despite component issues, helped to settle supply concerns.

However, Summer 2020 power prices also rose higher in line with gas on the prospect of higher carbon, coal and lingering nuclear fears in the long term.


Weekly UK Insight 23 September 2019
Source: Reuters


$/bbl 13 Sep 19 20 Sep 19 Change
Brent Crude Nov 19 60.22 64.28 6.7%

Source: Reuters

Brent crude oil prices spiked at $71/bbl on Monday before settling on Friday at $64.28/bbl, a 6.7% week-on-week increase, after drone strikes on a Saudi Arabian oil facility removed 5.7 million bpd of the country’s daily crude production, equivalent to 5% of global crude oil output.

Boris Johnson has said Britain, along with European allies and the U.S. are working on a joint response to ease tensions, after stating ‘with a very high degree of probability’ Iran were responsible for the attacks.

Saudi Aramco has pledged to bring production back to full capacity by the end of September, easing some concerns.


Weekly UK Insight 23 September 2019
Source: Reuters

Exchange Rates & Economics

£/$ 13 Sep 19 20 Sep 19 Change
GBP/USD 1.2500 1.2477 -0.2%

Source: Reuters

The Pound Sterling and Euro saw little change, with marginal falls against the U.S. dollar last week as the ongoing Brexit uncertainty continues.

The leaders of the UK, Germany and France, along with the European Council president, are due to meet in New York this week. It is expected they will discuss strategies proposed by the UK to break the current deadlock.

In UK politics, members of the Labour party are set to choose between either explicitly backing the remain, or that of leader Jeremy Corbyn and staying neutral until a later date.


Weekly UK Insight 23 September 2019
Source: Reuters

Regulatory and Market News

UK offshore wind sector sees CfD Round 3 auction prices running as low as £39.65/MWh

The UK’s offshore wind sector has smashed records for price in the government’s third Contracts for Difference auction round, with prices running as low as £39.65/MWh.

The Department for Business, Energy and Industrial Strategy (BEIS) this morning unveiled the hotly anticipated auction results, confirming that 5.5GW of new offshore wind capacity will be delivered at prices as low as £39.65/MWh.

That price is 30% lower than the lowest strike price seen in the second CfD auction in 2017, when projects came forward at £57.50/MWh.

Technology   2023/24 2024/25 Total Capacity (MW)
Advanced Conversion Technologies £/MWh 39.65 41.611 33.60
MW 27.50 6.10
Remote Island Wind £/MWh 39.65 41.611 275.22
MW 225.72 49.50
Offshore Wind £/MWh 39.65 41.611 5,466.00
MW 2,612.00 2,854.00

Source: BEIS

There were a total of six winning bids for offshore wind, three of which – Dogger Bank Creyke Beck A, Dogger Bank Creyke Beck B and Dogger Bank Teeside A – form part of the Dogger Bank project which is being brought forward by Forthwind, a consortium which includes energy giants SSE, RWE, Equior and Statkraft.

Each of the three successful Dogger Bank projects are sized at 1.2GW. Dogger Bank Creyke Beck A is to be delivered in the 2023/24 delivery year at the £39.65/MWh strike price, while the other two are to be delivered in 2024/25 at £41.61/MWh.

The fourth project which makes up the Dogger Bank site in the North Sea – the 1.4GW Sofia Offshore Wind Farm, to be developed by Innogy – was also successful, and is to be delivered in 2023/24.

Forthwind also bagged a fourth demonstrator project, sized at around 12MW, for the 2023/24 delivery year.

SSE meanwhile is also behind Seagreen Wind Energy, which bagged another contract in the auction. The 454MW Seagreen Phase 1 is to come forward in the 2024/25 delivery year.

A total of four remote island onshore wind projects were successful in the third auction round, witht wo advanced conversion technologies projects also landed contracts.

LINK: BEIS – CfD Allocation Round 3 Results

UK electricity smart meter rollout deadline delayed 4 years until 2024

The government has pushed back the deadline for smart energy meter rollout by four years until 2024. Previously, suppliers’ deadline was the end of 2020, but energy firms had warned the technology was not ready.

But the extra time could mean the cost of installing the new equipment is likely to rise further, to more than £13bn in total.

Customers are not obliged to have a smart meter fitted, but energy firms must have offered them to all UK households by the end of the new deadline. The promise of smart meters was that readings would be automatic, billing would be easier, and a new world of flexible charges would be ushered in.

Gillian Guy, chief executive of Citizens Advice, said: “this new deadline gives suppliers time to fix ongoing technical problems and make sure customer service isn’t sidelined as the rollout continues”.

LINK: BEIS – Smart meter rollout deadline 2024


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