Weekly UK Insight - 24 June 2019


p/therm 14 Jun 19 21 Jun 19 Change
Day-Ahead (DA) 29.30 28.00 -4.4%
Jul 2019 28.31 27.15 -4.1%
Winter 2019/20 51.42 51.36 -0.1%
Summer 2020 44.13 45.11 2.2%

Source: Reuters

The UK’s Day-Ahead gas price fell 4.4% to 28.00 p/therm, reflecting strong Norwegian gas imports, with the Langeled pipeline flowing at its 74 mcm/d capacity.

Warmer weather also curbed UK demand for heating, while Dutch spot prices hit a near 10-year low as a ramp up in LNG supplies in NW Europe is expected. The Netherlands is expecting six LNG tanker arrivals over the next couple of weeks with the UK scheduled for two further LNG arrivals in addition to the cargo that docked at South Hook over the weekend.

However, National Grid’s forecast gas demand is expected at 181 mcm/d, above the seasonal normal demand of 158 mcm/d, leaving the system slightly undersupplied.

Winter 2019/20 gas prices fell just 0.1% to 51.36 p/therm, as a fairly comfortable long-term UK supply-demand gas balance was largely offset by higher crude oil and European coal prices.

Meanwhile, we expect Medium Range Storage to be in injection mode at a rate of around 10 mcm/d for at least another week.

The oil and coal drivers had more of an impact further out with Summer 2020 gas prices gaining 2.2%. Risk surrounding the construction of Nord Stream 2 also had a greater impact further out. Ongoing difficulties with Danish construction permits and growing efforts by the U.S. to sanction companies involved in the Russia-led project could feasibly delay or put a halt to the project.


Weekly UK Insight 24 June 2019
Source: Reuters


£/MWh 14 Jun 19 21 Jun 19 Change
Day-Ahead (DA) 38.87 37.21 -4.3%
Jul 2019 39.25 38.37 -2.2%
Winter 2019/20 55.68 55.97 0.5%
Summer 2020 47.60 48.54 2.0%

Source: Reuters

Day-Ahead power prices fell 4.3% to £37.21/MWh responding to a growth in wind output forecasts for the coming week, and also supported by lower spot gas.

Winter 2019/20 power prices gained 0.5% to £55.97/MWh, reflecting increases in oil, coal, carbon and German forward prices.

However, National Grid last week predicted that 2019 would be the first year where more of Britain’s power will be generated from zero-carbon sources than from fossil fuels for the first time since the Industrial Revolution. This could mean that long term there is a reduced reliance on coal and carbon in the UK, although the influential German market is still heavily reliant on coal.


Weekly UK Insight 24 June 2019
Source: Reuters


$/bbl 14 Jun 19 21 Jun 19 Change
Brent Crude Aug 19 62.01 65.20 5.1%

Source: Reuters

Brent crude oil prices rose 5.1% week-on-week to $65.20/bbl, bolstered by tensions between Iran and the United States after U.S. Secretary of State Mike Pompeo said “significant” sanctions would be imposed on Tehran. Oil prices surged last week after Iran shot down a drone that the United States claimed was in international airspace and Tehran said was over its territory.

The market is also seeing a better demand picture because of the actions of central banks, which is benefitting all commodities.

In addition, crude oil is being driven higher by a weaker U.S. dollar. Oil is usually priced in dollars, so a weaker U.S. currency makes it cheaper for holders of other currencies.


Weekly UK Insight 24 June 2019
Source: Reuters

Exchange Rates & Economics

£/$ 14 Jun 19 21 Jun 19 Change
GBP/USD 1.2590 1.2740 1.2%

Source: Reuters

The value of the Pound Sterling rose versus the U.S. dollar in response to the weaker U.S. currency. The U.S. Federal Reserve is expected to cut interest rates soon to bolster the U.S. economy, while the European Central Bank President Mario Draghi last week called for additional stimulus to boost growth.

Meanwhile, the battle for the Conservative Party leadership has been narrowed down to just two candidates with bookies favourite Boris Johnson taking on Jeremy Hunt in a party members ballot with the result to be announced on 22 July.


Weekly UK Insight 24 June 2019
Source: Reuters

Regulatory and Market News

New laws guarantee payment for solar homes providing excess electricity

New solar homes and businesses creating and exporting electricity to the grid are now guaranteed a payment from suppliers under new laws introduced by the government on 10 June 2019.

The Smart Export Guarantee (SEG) ensures small-scale electricity generators installing solar, wind or other forms of renewable generation with a capacity up to 5MW will be paid for each unit of electricity they sell to the grid – tracked by their smart meter.

Residential solar panels are now over 50% cheaper than in 2011, and the SEG will build on the previous government subsidy scheme, which drove the installations of 850,000 small-scale renewable projects, but without passing on the cost to consumers.

Encouraging suppliers to competitively bid for electricity will give households the best market price for their energy, while providing the local grid with more clean, green energy, as the UK bids to become a net zero emissions economy.

Energy and clean growth minister, Chris Skidmore, said: “We want the energy market to innovate and it’s encouraging to see some suppliers already offering competitive export tariffs to reduce bills.”

SEG will place a legal obligation on energy suppliers with over 150,000 customers – covering more than 90% of the retail market – to introduce export tariffs by 1 January 2020. Some energy suppliers, including Octopus and Bulb, are already offering new smart tariffs, with some exceeding those offered under the previous subsidy scheme. At peak, solar has provided more than a quarter of the UK’s energy demands.

Chief executive of Octopus Energy, Greg Jackson, said: “These smart export tariffs are game changing when it comes to harnessing the power of citizens to tackle climate change. They mean homes and businesses can be paid for producing clean electricity just like traditional generators, replacing old dirty power stations and pumping more renewable energy into the grid. This will help bring down prices for everyone as we use cheaper power generated locally by our neighbours.”

The previous Feed-in Tariffs (FIT) scheme closed to new entrants from 31 March 2019, to reduce the costs to consumers as the price of installing solar panels came down. SEG is designed to continue to grow the small-scale renewables export market by supporting local generation and combined with existing technologies, like smart meters and battery storage.

LINK: Gov – Smart Export Guarantee (SEG)

National Grid predicts more UK power to come from clean power sources than fossil fuels in 2019

More of the UK’s electricity production this year will come from clean energy sources than fossil fuels, for the first time since the industrial revolution. That’s the verdict from National Grid, which is confident that 2019 will be the first year in which reliance on technologies such as wind, solar, nuclear and hydropower will overtake the need to use fuels such as coal and gas-fired power plants.

Earlier this year, Britain went more than two weeks without relying on any coal power to produce electricity for the first time in history and generated record levels of solar power for two days straight, supplying more than a quarter of the country’s daily electricity consumption.

In addition, the country has just broken the record for the total amount of hours in a year gone without using coal to produce power.

National Grid CEO John Pettigrew said: “The incredible progress that Britain has made in the past ten years means we can now say 2019 will be the year zero carbon power beats fossil fuel fired generation for the first time.

LINK: BBC – Zero carbon power growth in 2019


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