Weekly UK Insight - 25 February 2019


p/therm 15 Feb 19 22 Feb 19 Change
Day-Ahead (DA) 46.90 44.75 -4.6%
Mar 2019 47.64 44.90 -5.8%
Summer 2019 46.30 44.63 -3.6%
Winter 2019/20 58.98 58.07 -1.5%

Source: Reuters

The UK’s Day-Ahead gas price fell 4.6% to 44.75 p/therm as UK temperature forecasts for the next two weeks remained well above seasonal normal levels. As a result, National Grid’s forecast gas demand is expected at 257 mcm/d, lower that the seasonal normal demand of 275 mcm/d.

On the supply side, one LNG tanker arrived at the UK’s Isle of Grain terminal last week, with two more scheduled for delivery within the next two weeks. Total LNG send-out is expected at 46 mcm/d from all UK terminals.

Steady pipeline flows via Norway’s Langeled pipeline continued to support supply into the UK system. However, the weaker UK demand forecasts meant import flows through the Dutch BBL gas pipeline slowed.

Additionally, stronger UK wind power generation at the start of March is expected to reduce demand for gas to be used in power generation.

Summer 2019 gas prices fell 3.6% to 44.63 p/therm, pushed lower by falling global LNG prices.

Asian LNG prices continued to fall, pushing UK gas prices lower, as a global oversupply continued to weigh. There were several enquiries for LNG deliveries to China for Q2-2019, but overall LNG demand across north Asia remained exceptionally weak. Asia’s current LNG price is at the lowest level since September 2017, but it is unlikely to have reached its bottom yet.

The stronger Pound Sterling also made gas less expensive to import from Europe, while a weaker coal market was a further bearish price driver for UK gas.


Weekly UK Insight 25 February 2019
Source: Reuters


£/MWh 15 Feb 19 22 Feb 19 Change
Day-Ahead (DA) 49.08 46.00 -6.3%
Mar 2019 50.52 47.92 -5.1%
Summer 2019 49.52 47.87 -3.3%
Winter 2019/20 58.83 57.62 -2.1%

Source: Reuters

Day-Ahead power prices declined 6.3% to £46.00/MWh, in response to stronger forecasts for wind generation while also tracking European spot power prices lower.

Summer 2019 power prices declined 3.3% to £47.87/MWh, tracking a sharp drop in carbon prices. A decline in carbon allowances makes the overall cost of burning gas and coal for power generation less expensive, reducing the overall cost of UK electricity.

There are currently no unplanned nuclear outages in the UK. In Belgium, the nuclear reactor at Doel 3 is scheduled to return to service on Wednesday adding 1,000MW to the power grid in Northwest Europe.


Weekly UK Insight 25 February 2019
Source: Reuters


$/bbl 15 Feb 19 22 Feb 19 Change
Brent Crude Apr 19 66.25 67.12 1.3%

Source: Reuters

Brent crude oil prices hit 3-month highs last week, rising 1.3% to $67.12/bbl, supported by growing hopes that the United States and China would soon reach a deal to end their trade war.

Gains were limited after the U.S. reported its crude oil output hit a record 12 million bpd, undermining efforts by Middle East-dominated producer club OPEC to withhold supply and tighten global markets.

That means U.S. crude output has soared by almost 2.5 million bpd since the start of 2018. America is the only country to ever reach 12 million bpd of production.


Weekly UK Insight 25 February 2019
Source: Reuters

Exchange Rates & Economics

£/$ 15 Feb 19 22 Feb 19 Change
GBP/USD 1.2889 1.3052 1.3%

Source: Reuters

The value of the Pound Sterling rose versus the U.S. dollar on reports that the European Union is considering a Brexit extension whereby the UK will have to agree to remain in the EU until 2021.

Replacing the 21-month transition period with extra time as a member state would allow the UK and the EU to develop their plans for the future relationship with the aim of making the contentious Irish backstop redundant.

Brussels is determined to avoid offering a short extension only to have to revisit the issue in the summer when the government again fails to win round parliament.


Weekly UK Insight 25 February 2019
Source: Reuters

Regulatory and Market News

UK Government unveils plans for Smart Export Guarantee to replace export tariff

The Department for Business, Energy and Industrial Strategy (BEIS) has unveiled a new ‘Smart Export Guarantee’ to replace the current export tariff.

Until now the UK government has operated a ‘feed-in-tariff’ (FiT) scheme that includes an export payment of 5.24 p/kWh to reward small-scale energy generators for excess electricity they supply back to the grid. However, the FiT is being scrapped from the end of March 2019 after the government deemed it not to be in alignment with the “move towards fairer, cost reflective pricing and the continued drive to minimise support costs on consumers”.

The government has acknowledged that small-scale low-carbon electricity generation is “beneficial” to its objectives and the electricity system more broadly and has set out plans to replace the export element of the FiT scheme with a new Smart Export Guarantee (SEG) to remunerate small-scale energy producers for the excess electricity they supply to the grid.

  • Scheme would be open to all technologies currently eligible for the FIT scheme up to 5MW in capacity;
  • Larger electricity suppliers with >250,000 domestic electricity supply customers would be mandated to offer small-scale generators a price per kWh for the electricity they export to the grid. Smaller suppliers can opt to voluntarily provide a SEG tariff;
  • Suppliers would determine the tariff per kWh for remuneration, and the length of the contract;
  • Remuneration must be greater than zero and at times of negative pricing generators must not be required to remunerate suppliers for electricity exported to the grid;
  • Electricity exported to the grid from eligible generators must be metered – for domestic installations, BEIS expect smart meters to enable this;
  • Installations in receipt of support through the FIT scheme will be ineligible for the SEG. The receipt of RHI payment will not in itself preclude an installation from registering for the SEG. Neither will other forms of Government support, including local or regional;
  • Where storage is co-located with low-carbon generation, BEIS is seeking views on whether SEG payments should be limited to ‘green’ electricity, or also paid out on any ‘brown’ electricity exported from the storage device.

The government expects there to be a “hiatus period” between the closure of the feed-in tariff on 31 March 2019 and the implementation of the SEG. This would mean small-scale renewables will be left without a route to market, however government has stressed this hiatus is expected to only last for a “short period of time”.

LINK: BEIS – gov to replace export tariffs

UK Power Networks targets UK’s first smart charging market for electricity vehicles

Distribution network operator UK Power Networks (UKPN) is taking innovative steps to create the country’s first smart charging market for electric vehicle drivers.

The new market will put electric vehicle drivers in control, enabling them to charge when and where they wish, while rewarding people who choose to fill up their vehicle outside the morning and early evening electricity peak times.

Filling up a typical electric vehicle on a fast charger consumes roughly as much electricity as a house would use at the peak time of the day and clusters of electric vehicles can place significant additional demands on the local electricity infrastructure. UK Power Networks is developing innovative ways of managing this additional demand on its network through smart charging and by doing so, keeping energy bills lower than if new infrastructure was built unnecessarily.

For its SmartCar project, UK Power Networks has commissioned independent research on how smart charging (moving charging away from peak times in weekday evenings) can help avoid an increase in peak demand.

LINK: Fleetpoint – UKPN EV charging market


Disclaimer: These views and recommendations are offered for your consideration and Beond makes every effort to ensure that the data and information in this report is accurate. However, due to the volatile and unpredictable nature of the energy markets, Beond cannot guarantee the accuracy of both the information and the recommendations provided. Beond does not accept any responsibility for errors or misstatements, or for any direct, indirect, consequential or other loss arising from any use of this information and/or further communication in relation to this information.