Weekly UK Insight - 3 June 2019


p/therm 24 May 19 31 May 19 Change
Day-Ahead (DA) 29.50 26.30 -10.8%
Jul 2019 29.82 27.57 -7.5%
Winter 2019/20 53.85 52.15 -3.2%
Summer 2020 45.34 44.12 -2.7%

Source: Reuters

The UK’s Day-Ahead gas price slid 10.8% to 26.30 p/therm, representing a two-year low for Britain’s spot gas prices.

The UK gas market has started the week oversupplied by about 44 mcm/d, primarily due to increased Norwegian gas pipeline imports.

The return to services of Norway’s Kollsnes processing plant and Troll gas field meant that gas flows through Langeled, Norway’s largest pipeline, reached full capacity at 74 mcm from just 37 mcm on Friday, while those through the Vesterled pipeline rose to 16 mcm from 2 mcm on Friday.

High forecasts for wind generation today also took pressure off prompt gas prices as demand for gas declines when wind generation is strong.

Winter 2019/20 gas prices fell 3.2% to 52.15 p/therm, driven lower by Brent crude oil and European coal prices.

Weaker short-term gas demand has allowed Britain’s gas storage operators to inject at a rate of 21 mcm/d, helping to refill the UK’s Medium Range Storage facilities ahead of the winter season.

Meanwhile, and increase in LNG deliveries to UK terminals has boosted send-out to around 48 mcm/d.

However, expected weakness in the Pound Sterling could limit losses, as the weaker currency makes it more expensive to import gas from our European neighbours and Middle Eastern LNG suppliers.


Weekly UK Insight 3 June 2019
Source: Reuters


£/MWh 24 May 19 31 May 19 Change
Day-Ahead (DA) 39.09 38.04 -2.7%
Jul 2019 40.79 39.10 -4.1%
Winter 2019/20 57.43 56.04 -2.4%
Summer 2020 48.74 47.66 -2.2%

Source: Reuters

Day-Ahead power prices declined 2.7% to £38.04/MWh, in response to lower spot gas prices, mild temperatures and strong wind output forecast for the coming week.

Winter 2019/20 power prices fell 2.4% to £56.04/MWh, reflecting losses in oil, gas, coal, carbon and German forward prices.

EDF’s Hinkley Point B-7 nuclear reactor is scheduled to restart power production operations on 6th June, following a 3-month outage, adding 480MW of power capacity to the UK grid network.


Weekly UK Insight 3 June 2019
Source: Reuters


$/bbl 24 May 19 31 May 19 Change
Brent Crude Aug 19 68.69 64.49 -6.1%

Source: Reuters

Brent crude oil prices recorded their biggest weekly drop in six months, falling 6.1% week-on-week to $64.49/bbl, amid stalling demand and as trade wars raised concerns of a global economic slowdown.

Oil prices slid on fresh trade worries after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, which is one of the largest U.S. trade partners and a major supplier of crude oil.

The U.S.-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the U.S. and Mexico also hit the demand outlook for the Americas.


Weekly UK Insight 3 June 2019
Source: Reuters

Exchange Rates & Economics

£/$ 24 May 19 31 May 19 Change
GBP/USD 1.2712 1.2631 -0.6%

Source: Reuters

The value of the Pound Sterling was edged lower versus the U.S. dollar and euro at the end of a volatile month. However, the trajectory of the British currency is a concern to some who think that Prime Minister Theresa May’s resignation could open the door for a ‘hard Brexiteer’ to step into power.

Morgan Stanley Economist Jacob Nell said: “The success of the Brexit party is likely to put the Conservatives under pressure to support a harder version of Brexit, while the success of the parties who support staying in the EU is likely to put Labour under pressure to support a second referendum.”


Weekly UK Insight 3 June 2019
Source: Reuters

Regulatory and Market News

Government plans T-3 auction in February, with Renewables competing on equal basis

Government plans to run a capacity market (CM) auction in February 2020 for delivery in 2022/23. It intends to allow renewables to bid for contracts and make changes to methodologies that govern de-rating factors for interconnectors.

All of which is subject to successfully re-instating the CM following its suspension by the European Commission, which upheld a legal challenge by Tempus Energy over the treatment of demand-side response.

The Department for Business, Energy and Industrial Strategy (BEIS) said the Commission is likely to have made a decision by early next year. If that happens, the T-1 auction will take place a week after the T-3.

Agreements and credit cover

New build plants that pre-qualified for the postponed T-4 auction and hoped to get 15-year terms will only be able to bid for 1-year agreements in the T-3 if they have already commissioned.

As the BEIS stated: “Plant which has commissioned in the last year has demonstrated (by commissioning) that it does not need such an agreement in order to secure financing”.

The Government will suspend credit cover requirements for the 2022/23 T-3 auction, the 2023/24 T-4 auction, and the 2020/21 T-1 auction during the standstill period. However, credit cover will be required with 15 days of the standstill ending, said BEIS, though DSR and interconnectors will get 40 days to pay.

Renewables and equivalent firm capacity

Renewable technologies will be allowed to bid for agreements on an ‘equivalent firm capacity’ basis – provided they do not receive subsidies such as the RO, Fit, CfD or other benefits which BEIS said could constitute state aid. As such, those that use the Enterprise Investment Scheme or Venture Capital Trust set ups would have to declare it and see payments deducted from any CM agreements awarded.


BEIS said it would seek to remove the ‘data floor’ used to determine detracting factors for interconnectors as leaving it in place “risks artificially constraining the final interconnector de-rating factors to a higher level than would be justified by the wider evidence”.

LINK: Gov – Plans for T-3 CM auction in Feb 2020

Ireland and France to build new electricity cable to avoid reliance on Britain

A new 500km electricity cable called ‘Celtic Interconnector’ will be built to bypass Britain and connect Ireland directly to the European Union’s energy markets after Brexit, under plans confirmed by Irish Taoiseach (“Prime Minister”) Leo Varadkar and French President Emmanuel Macron.

Ireland is expecting to face significant disruption when Britain leaves the single market because a large proportion of the country’s trade travels through the United Kingdom and then onwards across the Irish sea.

The new power cable, which is also expected to include a fibre-optic telecoms connection, would be Ireland’s only direct link to another EU member state once Britain leaves. It would carry around 700MW at high-voltage direct current, and run under the sea.

Irish power grid operator Eirgrid said that the link “will be beneficial for both countries and Europe as a whole”. It would stretch from the country’s south coast to Brittany in north west France.

It is planned to be completed by 2026 and will cost €930 million, with 65% of the project’s cost allocated to Ireland and 35% to France. However, because the infrastructure has been declared a Common Interest Project by the European Commission, it is eligible for EU financial support, with an application for a grant covering up to 60% of its costs.

LINK: Eirgrid – Celtic Interconnector


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