16 December 2022

Headlines

This week saw the reversal of previous consecutive weeks of largely bullish contract movements across both gas and power. This week in particular saw the softening of supply margins, weighing on a lot of the gains from the previous week, particularly in the near-term. We do however, continue to observe strong price disparity between day-ahead contracts and those further out on the forward curve, albeit this deficit has narrowed somewhat this week. Day-ahead gas fell 17.0% to 297.00p/th, helped by the strong influx of LNG continuing to reach UK landing terminals and higher wind outturn, easing demand for gas-fired assets to help bridge the supply/demand gap. Like gas, day-ahead power fell 50.8% to £194.00/MWh, with a significant contributor of this week-on-week decline driven by a £155.00/MWh drop on Friday 16 December versus the day previous – as we expect to see strong wind outturn early next week. Elsewhere, January 23 gas was down 10.8% at 306.00p/th, and February 23 gas decreased 10.4% to 311.00p/th. All seasonal gas contracts declined this week, down by 6.8% on average. Like gas, all seasonal power contracts saw losses this week, down on average by 6.2%, as summer 23 power decreased 8.7% to £276.50/MWh, while winter 23 fell 9.8% to £305.00/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 50.8% to £194.00/MWh, with a significant contributor of this week-on-week decline driven by a £155.00/MWh drop on Friday 16 December versus the day previous.
  • January 23 power slipped 31.1% at £310/MWh and February 23 power decreased 27.8% to £325/MWh.

Annual October contract

  • Q123 power moved 24.0% lower to £312.50/MWh.
  • The annual April 23 contract lost 9.3% to £290.75/MWh, but remained 177.6% higher than the same time last year (£104.75/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 52.0% to £301.30/MWh, following baseload power lower.
  • January 23 peak power declined 32.5% at £538.25/MWh, and February 23 peak power decreased 26.5% to £538.25/MWh.

Annual October contract

  • The annual April 23 peak power rose 4.7% to £376.35/MWh
  • This is 340.8% higher than the same time last year (85.38/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 6.2%.
  • Summer 23 power decreased 8.7% to £276.50/MWh, while winter 23 fell 9.8% to £305.00/MWh.

Seasonal baseload power curve

  • Like baseload, all seasonal peak power contracts declined this week, down 4.7% on average.
  • Summer 23 and winter 23 peak power dropped 4.8% and 4.7% respectively, falling to £333.30/MWh and £419.40/MWh.

Commodity price movements

Oil and coal

  • Brent crude prices fell week-on-week, down 0.9% to average $79.61/bl, a fifth consecutive week of price decline
  • Uncertainty in global commodity markets continue to exacerbate volatility in price, particularly evident over recent months
  • Recent price drops continue to be caused, in part by fears of reduced demand and global economic slowdown. Rising interest rates in the week also stifled prices
  • Sustained losses were capped by reports that the Keystone pipeline outage will be potentially continuing for weeks to come

Carbon (UK and EU ETS)

  • EU and UK ETS prices saw bearish price movements this week. EU ETS slipped 0.6% to average €87.18/t, while UK ETS carbon decreased 7.6% to £72.24/t
  • Uncertainty in global commodity markets continue to exacerbate volatility in price, particularly evident over recent months
  • After a period of particularly low wind and renewable output seen this week, we saw a notable uplift in wind outturn which took the strain away from gas and fossil fuel generating assets needed to meet demand – in turn reducing demand for EUA’s.

Wholesale price snapshot – Friday-on Friday

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