Weekly UK Insight - 9 September 2019


p/therm 30 Aug 19 6 Sep 19 Change
Day-Ahead (DA) 25.70 25.10 -2.3%
Oct 2019 33.03 31.96 -3.2%
Winter 2019/20 46.33 45.31 -2.2%
Summer 2020 42.63 42.41 -0.5%

Source: Reuters

The UK’s Day-Ahead gas price fell 2.3% to 25.10 p/therm as an influx of LNG cargoes, as well as higher than expected Norwegian and UK Continental Shelf gas pipeline flows, meant the UK gas system started the week oversupplied.

At least five LNG cargoes are scheduled to arrive at British terminals within the next two weeks. As a result, LNG send-out from Britain’s terminals remains strong at 20 mcm/d.

However, spot gas prices look set to rise. As looking at the demand side, National Grid’s forecast gas demand is expected at 188 mcm/d, well above the seasonal normal demand of just 114 mcm/d.

Gas imports from Norway have already been reduced by around 42 mcm/d as a result of planned maintenance at Norway’s Ormen Lange gas field. Plus, there is a full shutdown at Norway’s Langeled gas pipeline lasting from 10-23 September.

Winter 2019/20 gas prices dipped 2.2% lower week-on-week to 45.31 p/therm, as the forward curve tracked the prompt market lower. However, clients trading on the forward market would be wise to lock out any remaining winter volume as soon as possible. The winter contract delivers in just 3 weeks’ time.

Temperatures are trending lower, and the increase in gas demand could well drive forward prices higher if the UK gas system finds itself undersupplied in the coming weeks. In addition, lots of energy users will be locking out their open positions before the end of September, driving demand and prices higher.


Weekly UK Insight 9 September 2019
Source: Reuters


£/MWh 30 Aug 19 6 Sep 19 Change
Day-Ahead (DA) 32.87 33.72 2.6%
Oct 2019 42.27 41.18 -2.6%
Winter 2019/20 52.05 50.82 -2.4%
Summer 2020 47.19 46.67 -1.1%

Source: Reuters

Day-Ahead power prices rose 2.6% to £33.72/MWh, responding to lower wind output and rising demand levels.

Winter 2019/20 power prices lost 2.4% to £50.82/MWh, tracking higher oil and coal.

However, the front-season delivers in less than 3 weeks on 1 Oct. Any clients who have yet to secure their forward winter volume are advised to lock this in as soon as possible, before any further major unplanned outages drive the market higher.

Any new unplanned outages are unlikely to be resolved in time so prices are more likely to rise in the coming weeks.


Weekly UK Insight 9 September 2019
Source: Reuters


$/bbl 30 Aug 19 6 Sep 19 Change
Brent Crude Nov 19 60.43 61.54 1.8%

Source: Reuters

Brent crude oil prices rose 1.8% week-on-week to $61.54/bbl, on expectations that Saudi Arabia, the world’s largest oil exporter, will continue to support output cuts by OPEC and other producers to prop up prices under new Energy Minister Prince Abdulaziz bin Salman. Oil price gains were also supported by comments from the United Arab Emirates’ energy minister that OPEC and its allies are committed to balancing the crude market.

Overall compliance with the cuts among the 11 OPEC members with quotas – that is OPEC minus exempted producers Libya, Venezuela, and Iran – fell to 103% in August from 117% in July.

Last month, Russia’s oil output exceeded its quota under the OPEC+ agreements, producing 11.29 million bpd during August.


Weekly UK Insight 9 September 2019
Source: Reuters

Exchange Rates & Economics

£/$ 30 Aug 19 6 Sep 19 Change
GBP/USD 1.2156 1.2281 1.0%

Source: Reuters

The Pound Sterling rose in value versus both the US dollar and euro after opposition MPs and Tory rebels supported a bill aimed at blocking a no-deal Brexit by a vote of 327 to 299.

The bill forces the PM to ask for an extension beyond the 31st October Brexit deadline if a deal has not been agreed with the EU. MPs backing the bill attempted to push it through as quickly as possible so it becomes law before the government suspends Parliament this week.

The Government is expected to ask MPs to agree to a snap general election for a second time on Monday, in what could be one of Parliament’s last acts before being suspended. However, the government is expected to be defeated, with opposition parties wanting their law aimed at avoiding a no-deal Brexit to be implemented first.


Weekly UK Insight 9 September 2019
Source: Reuters

Regulatory and Market News

Ørsted exits SME and mid-market energy supply sector to concentrate on 30GWh+ I&C customers

Ørsted has announced that it is to exit the SME and mid-market energy retail sector to concentrate on Industrial and Commercial customers that use at least 30 GWh of power per year and on the global expansion of its renewable generation assets.

It will continue to serve existing mid-market customers but will not renew contracts when they expire. The company will still sell through brokers and third party intermediaries but aims to offload more of its offshore wind power through corporate Power Purchase Agreements (PPA), as well as green gas.

Ørsted’s new strategic ambition is to invest DKK 200bn (£24bn) to grow installed capacity to 15GW by 2025, and then to 30GW by 2030.

List of Ørsted’s current wind farms

Name Capacity


Date of Operation
Barrow 90 2006
Burbo Bank 90 2007
Burbo Bank Extension 258 2017
Gunfleet Sands 170 2013
Hornsea One 1,200 2020
Hornsea Two 1,800 2020
Hornsea Three 2,400 2020
Lincs 270 2012
London Array 630 2012
Race Bank 573 2018
Walney 367 2012
Walney Exension 659 2018
West of Duddon Sands 389 2014
Westermost Rough 210 2015

Source: Ørsted

Ørsted’s UK investments are underwritten by government CFDs which are PPAs by another name.

Globally companies in the commercial and industrial sector are now the biggest buyers of renewable energy, in 2018 they signed over 13GW of corporate PPAs in 21 different countries.

Ørsted’s global expansion in offshore and onshore wind allows them to meet the needs of large C&I customers, offering customers access to a suite of products including CPPA’s, to help these large organisations achieve their green ambitions.

LINK: Energyst – Orsted exits mid-market

Public sector ‘should invest in solar now’

Falling costs and rising demand for solar power purchase agreements (PPAs) makes large scale solar investment a good bet for local authorities, according to Swidon Borough Council.

Swindon and other authorities such as Warrington are using cheap Public Works Loan Board finance from the government to invest in solar farm and other property schemes on the assumption they will be profitable.

The last 12 months has seen significant environmental commitments made by central and local government in the UK. A gradual re-emergence of large-scale solar PV opportunities, following the abrupt slowdown after subsidies for new projects finally ended in 2018.

The good news for local authorities committing to reduce their carbon emissions is that subsidy-free solar is now becoming commercially viable in the UK.

This is due to a number of factors on both the supply and demand side. Installation costs for ground-mounted solar have fallen considerably, with EPC costs now as low as £500,000/MW compared to £900,000/MW only a few years ago.

The introduction of co-location of solar with battery storage also offers greater optionality with the opportunity to tap into additional revenue streams. These include arbitrage (storing energy when it is abundant, and therefore cheaper, and discharging it when demand is greater and the cost is higher); grid-balancing services (smoothing out the peaks and troughs which occur naturally in power demand); and the capacity market (which provides insurance against the possibility of future blackouts).

Demand for solar power purchase agreements (PPAs) – the contract between generator and buyer – has grown sharply, with around 40 PPA providers active in the UK and a competitive market for short-term PPAs.

Local authorities are very well placed to benefit from investing in solar PV and take a further leadership role in line with their climate change commitments.

Some sites which may have been discounted at the time of subsidies may now be worth a second look, as capacity and cost of local grid connections may have changed since the initial investigation. Where there is no suitable site within a council’s own geographic area, there may be opportunities to lease or buy land outside of their boundaries.

LINK: Energyst – Investment in solar


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.