Weekly UK Insight - 28 January 2019

Gas

p/therm 18 Jan 19 25 Jan 19 Change
Day-Ahead (DA) 60.40 55.20 -8.6%
Feb 2019 61.79 56.04 -9.3%
Summer 2019 54.76 50.76 -7.3%
Winter 2019/20 64.22 61.10 -4.9%

Source: Reuters

The UK’s Day-Ahead gas price fell 8.6% to 55.20 p/therm reflecting an oversupplied gas system and a drop in demand for gas to be used in power production. National Grid’s forecast gas demand is expected to hit 355 mcm/d today, compared to the seasonal normal demand of 289 mcm/d.

Despite predominantly below seasonal normal temperatures being forecast for the next 2-4 weeks, temperatures are trending upwards steadily reducing gas demand for heating.

High imports from Continental Europe also saw both Dutch BBL and Norwegian Langeled pipelines flowing close to 100% of capacity, contributing to the well-supplied UK gas system.

Three LNG tankers are scheduled to arrive at UK terminals over the next two weeks, supplying Britain’s gas network during early February. Total LNG send-out is expected to remain at around 45 mcm/d from all UK terminals.

Summer 2019 gas prices slid 7.3% to 50.76 p/therm reflecting losses in European gas, power, crude oil, coal and carbon prices, as well as gains in the value of the Pound, making gas imports less expensive.

New global projects for major LNG exports coming online in the first half of 2019 continue to drive LNG prices down. The largest new projects are based in the U.S., with Europe expected to be a key destination for shipments of LNG as eastern bloc countries in particular attempting to reduce their historic over-reliance on Russia gas supplies.

UK NBP

Weekly UK Insight 28 January 2019
Source: Reuters

Power

£/MWh 18 Jan 19 25 Jan 19 Change
Day-Ahead (DA) 64.86 54.03 -16.7%
Feb 2019 63.89 59.14 -7.4%
Summer 2019 56.88 53.82 -5.4%
Winter 2019/20 63.72 61.10 -4.1%

Source: Reuters

Day-Ahead power prices fell 16.7% to £54.03/MWh in line with European power prices following the return to service of several French and Belgian nuclear reactors.

Summer 2019 power prices declined 5.4% to £53.82/MWh, as longer-term concerns over European nuclear outages were eased by the return to service of the 1.3GW Flamanville 1 plant in northwest France after a nine-month outage. Belgium’s 433MW Doel 2 nuclear reactor is also expected to restart production on 4th Feb.

Continental Europe supplies the UK Grid during times of peak power demand via sub-sea interconnectors, so major French and Belgian outages can have a significant impact on both spot and forward UK power prices.

UK POWER BASELOAD

Weekly UK Insight 28 January 2019
Source: Reuters

Oil

$/bbl 18 Jan 19 25 Jan 19 Change
Brent Crude Mar 19 62.70 61.64 -1.7%

Source: Reuters

Brent crude oil prices slid 1.7% to $61.64/bbl last week, on evidence of yet more growth in U.S. crude supply, although the price is still on course for its strongest January gain for 14 years.

Further weighing on oil markets, the trade dispute between the United States and China looks unlikely to end anytime soon and its impact on the Chinese economy is increasing. But the global demand outlook hinges largely on China and whether its refiners will continue to import crude at 2018’s rapid pace.

BRENT CRUDE OIL – MONTH-AHEAD

Weekly UK Insight 28 January 2019
Source: Reuters

Exchange Rates & Economics

£/$ 18 Jan 19 25 Jan 19 Change
GBP/USD 1.2873 1.3201 2.5%

Source: Reuters

The value of the Pound Sterling increased versus the U.S. dollar after reports of a delay to the scheduled Brexit deal in March.

The point started rising after British Prime Minister, Theresa May, won her no-confidence vote after her Brexit deal was rejected. While she survived to remain prime minister, she has been unable to come up with a clear alternative measure to leave the European Union. A second referendum on Brexit could be on the horizon and that could ironically help the Sterling.

EXCHANGE RATE – GBP/USD (£/$)

Weekly UK Insight 28 January 2019
Source: Reuters

Regulatory and Market News

National Grid adds ‘Distributed Resource Desk’ to control room to boost flexibility

National Grid has this week launched a new ‘Distributed Resource Desk’ in its control room, enabling the Electricity System Operator (ESO) to allow smaller market players to participate much faster.

The desk enables the ESO’s power system engineers to issue instructions to smaller power generators, battery storage operators and demand side response (DSR) providers quicker than before, building on National Grid’s opening up of the Balancing Mechanism market last year.

And the desk has already reaped dividends, with the number of bids and offers from these providers accepted by the ESO control room more than doubling to 87MWh in its first 24 hours of operation.

The ESO control room receives bids and offers from generators daily, detailing their power capacities, time frames and prices. These bids are accepted or rejected in order to manage the network at the least possible cost.

National Grid staff working on the new desk have a dedicated focus on optimising new assets to develop their capabilities and by April, the firm expects the Balancing Mechanism market to grow by 179% to 145MW.

Claire Spedding, balancing programme director at National Grid ESO, said the addition of the distributed resource desk was the “next exciting step” for the Balancing Mechanism market.

“Putting a dedicated ‘Distributed Resource’ desk into the control room means we can create expertise in really understanding how these assets can contribute to balancing the nation’s electricity system,” she said.

The launch has also been well received by industry. A spokesperson for DSR provider Flexitricity described the announcement as a “huge step forward” for National Grid in its provision of a flexibility market.

Flexitricity was one of the first industry market providers, alongside Limejump, to access the Balancing Mechanism last year.

A spokesperson for Limejump told Current±: “We feel this step is a further acknowledgement that sustainable resources and technology can balance the grid and compete, and even surpass the traditional power generation sources in this critical market.

“The relationship we and other flexible providers have with National Grid is going from strength to strength, embracing innovation towards the future of the UK energy system.”

LINK: National Grid – Distributed Resource desk

Beond announces OJEU Framework and Public Contracts Directive 2015 compliant tender process

Beond has launched a brand new OJEU Framework to allow Public Sector buyers to benefit from a fully OJEU compliant tender using their innovative technology to deliver efficiency gains and tangible savings.

The UK based energy software provider can offer increased competition by inviting up to 25 energy suppliers using a standalone OJEU compliant e-auction, or up to 10 suppliers via a call-off framework.

Beond typically delivers clients savings of at least 5% against Public Buying Organisation (PBO) prices, tailored supply contract terms as well as greener, low-carbon solutions.

Buyers can audit their current supply contracts by using Beond’s reverse engineering software. This highlights potential savings so that clients can avoid hidden costs and reduce supplier margins when negotiating future contracts.

Mike Chan, Sales Director at Beond says: “Recent OJEU advertisements show increasing numbers are leaving the PBOs in search of innovation, better value and bespoke energy management support. Our energy experts have monitored the public-sector’s offers and buying habits for over 20 years. We believe the public sector could avoid £155 million per annum in energy costs by adopting an alternative approach that can target significant savings.”

Beond’s Public Sector Savings

Organisation Saving
North Tynside Council 4.7%
Newcastle City Council 5.1%
Optivo 6.7%
Bournemouth Churches Housing Association 7.4%
Salford City Council 12.9%
Salvation Army Housing Association 19.0%

Beond’s framework is available to all public sector organisations in England, Wales and Scotland. Details on how to compare existing contracts and join the online e-auction can be found on the Beond website. To receive a no obligation risk-free supply contract audit using our reverse engineering software please contact us below.

LINK: Beond Group – Public Sector Framework

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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.