Weekly UK Insight - 7 January 2019


p/therm 28 Dec 18 4 Jan 19 Change
Day-Ahead (DA) 57.50 60.00 4.3%
Feb 2019 63.29 63.55 0.4%
Summer 2019 55.18 54.54 -1.2%
Winter 2019/20 63.45 62.83 -1.0%

Source: Reuters

The UK’s Day-Ahead gas price rose 4.3% to 60.00 p/therm in response to an unexpected drop in Norwegian and Dutch gas flows to Britain.

Last week also saw the coldest recorded temperatures of the current winter, boosting gas demand to be used in heating. The UK’s total gas demand is at 331 mcm/d, 57 mcm above seasonal normal levels for this time of year.

Temperatures are also expected to fall below seasonal normal levels on Wednesday, which is likely to boost withdrawals from gas storage.

Up to five LNG tankers are expected to arrive in to British LNG terminals over the next two weeks, providing 45+ mcm/d of gas supply during the cold winter period.

Summer 2019 gas prices fell 1.2% to 54.54 p/therm tracking losses in European gas markets and reduced power risks. Power outages across the UK and Northwest Europe have recently been boosting gas consumption to meeting power production demand. However, lower power supply risks have eased fears of shortages in the coming months.

Belgium’s 1GW Tihange 3 nuclear reactor returned to service a week early on 1 January, according to operator Electrabel. The nuclear unit returned to power operations eight weeks ahead of schedule boosting available supply capacity across Northwest Europe.

Closer to home, there are still five nuclear reactors offline in the UK, however all outages were scheduled for standard maintenance of refuelling.


Weekly UK Insight 7 January 2019
Source: Reuters


£/MWh 28 Dec 18 4 Jan 19 Change
Day-Ahead (DA) 61.78 62.38 1.0%
Feb 2019 64.69 64.17 -0.8%
Summer 2019 57.33 56.44 -1.6%
Winter 2019/20 63.28 62.35 -1.5%

Source: Reuters

Day-Ahead power prices rose 1.0% to £62.38/MWh as colder weather across the UK and Europe increased power demand and low wind speeds reduced supply.

Summer 2019 power prices slid 1.6% to £56.44/MWh, falling in line with the equivalent gas contracts and as power supply risks in Belgium were reduced, lowering anticipated interconnector demand from the UK.

The eagerly anticipated 1,000MW Nemo subsea power interconnector that links the UK and Belgium is scheduled to become fully operational within the next month. The HVDC cable will enable trade of electricity between the UK and Belgium during times of peak winter demand.


Weekly UK Insight 7 January 2019
Source: Reuters


$/bbl 28 Dec 18 4 Jan 19 Change
Brent Crude Mar 19 52.20 57.06 9.3%

Source: Reuters

Brent crude oil prices rose 9.3% to $57.06/bbl last week, lifted by optimism that talks would soon resolve the trade war between the United States and China, while supply cuts by major producers also supported the market. OPEC oil supply fell in December by 460,000 bpd, to 32.68 million bpd led by cuts from top exporter Saudi Arabia.

However, in comparison U.S. crude oil production stayed at a record 11.7 million bpd in the last week of 2018, making the U.S. the world’s biggest oil producer ahead of Russia and Saudi Arabia.


Weekly UK Insight 7 January 2019
Source: Reuters

Exchange Rates & Economics

£/$ 28 Dec 18 4 Jan 19 Change
GBP/USD 1.2705 1.2726 0.2%

Source: Reuters

The value of the Pound Sterling was fairly steady versus the U.S. Dollar last week as UK manufacturing data beat expectations. However, with Brexit uncertainty continuing to hang over the currency it remains unclear how much impact UK economic data will have on the pound in the coming weeks.

In global news, U.S. and Chinese officials will meet today for their first formal talks since the beginning of a three-month truce in a trade war between the world’s two largest economies that has rattled global markets.


Weekly UK Insight 7 January 2019
Source: Reuters

Regulatory and Market News

Npower looks set for merger with E.ON after deal with SSE scrapped amid ‘challenging conditions’

The merger of two of the UK’s biggest energy firms has been called off after Npower and SSE blamed the Government’s price cap and increasing competition for their failure to reach a deal.

Initial indications that the merger might collapse came in November when the companies admitted they were having to reconsider their terms and would have to inject more capital into the new energy supplier because of changes in the market.

SSE has 7.35m customers and Npower has 4.06m after losing half a million in the first nine months of the year.

SSE’s chief executive Alistair Phillips-Davies said he expected the big six would still lose customers to smaller rivals next year, but at a slower rate than before. “Overall the non-big six will continue to grow their market share,” he said.

In December, concerns have been raised over job losses at Npower after staff were told the ownership of the big six energy supplier will be transferred to the German energy utility E.ON.

It was unclear whether the company would stay with its German parent, Innogy, or switch to another German energy firm, E.ON, which is midway through a complex asset swap with Innogy’s owner RWE.

However, it has emerged that Npower will end up at E.ON, which poses a headache for E.ON because it already has a UK business supplying energy to households and businesses under the E.ON brand.

While no decisions have been made, insiders think it is likely that in the short-term the Npower brand will remain rather than vanish overnight once E.ON takes ownership.

However, there are doubts over the viability of the company maintaining two supply businesses in the UK in the medium term.

After the failure of the SSE-Npower merger, it is expected that E.ON would likely have to absorb Npower and would spend several painful years to restructure and integrate it.

Npower has been loss-making for the last few years and the owner Innogy warned after the merger collapsed that keeping npower would burn a £226m hole in its revenues in 2019.

According to the energy regulator, Ofgem, Npower’s profit margin was -5% last year, compared to 5% for E.ON.

LINK: Guardian – E.ON & Npower merger

Edinburgh Premier Inn claims to be the first in the UK to be powered entirely by battery storage

Premier Inn, in collaboration with project partner E.ON, has installed the UK’s first battery-powered hotel, located in Edinburgh, Scotland.

In an increased effort to make its hotels more energy efficient and reduce costs, the Whitbread-owned Premier Inn chain has begun trialing a 100kW lithium-ion battery at The Gyle at Edinburgh Park.

The 3m3 five-tonne battery works by storing power from the National Grid during off-peak times when electricity prices are lower, saving the energy for periods of high consumption. There is enough energy stored in the battery to run the entire hotel and provide power to the restaurant for up to three hours.

E.ON customer accounts director Richard Oakley said: “By adding the flexibility of battery storage we can also help Whitbread to upgrade to the full-board option of drawing electricity from the grid when prices are low, storing that energy for use at peak times and having the ability to sell it back to the grid to help balance supply and demand on the network.

“Premier Inn is showing how hotel chains and large power users can further save money, reduce their carbon footprint and support the development of a lower-carbon, smarter energy grid in the UK.”

The battery takes two hours to charge and will be employed for around two to three hours per day. E.ON and Whitbread chose the Edinburgh site specifically because Scotland has a large influx of renewable power coming in from its wind assets, which can be volatile. The battery will benefit the National Grid by reducing electricity demand at times of low energy generation, i.e. when the wind isn’t blowing.

E.ON, which supplied and installed the battery, said that the battery will knock £20,000 per year off of the hotel’s energy bill. E.ON will continue to manage and provide maintenance for the battery system.

Whitbread head of energy and environment Cian Hatton added: “Batteries are of course everyday items, more commonly associated with powering small household goods, like the TV remote control, so it’s incredibly excited to launch the UK’s first battery-powered hotel – an innovation which will save money, ensure security of supply and support the transition to a more flexible grid”.

Premier Inn is already the UK’s leading hotel chain in terms of solar panels, with 169 assets installed across its hotels.

LINK: E.ON – Press Release


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