Energy Wholesale Market Review, 23 August 2019

Baseload electricity

• Day-ahead power was up 14.8% to £41.0/MWh, as lower wind generation is forecast over the bank holiday weekend and early next week.
• September and October 19 power contracts were 3.8% and 6.1% lower at £40.9/MWh and £41.8/MWh respectively. Both contracts are at a three-week low.

• Annual October 19 power dropped 2.8% week-on-week to £49.9/MWh.
• The contract is 6.4% below the same time last month (£53.4/MWh), and 11.4% lower than the same time last year (£56.4/MWh).

Forward curve comparison

Annual October Contract

• Day-ahead peak power was up 8.8% to £42.3/MWh, just £1.3/MWh above its baseload counterpart.
• September and October 19 peak power decreased by 3.4% and 5.3% to £44.1/MWh and £46.8/MWh, respectively.

• Annual October 19 peak power was 2.3% lower at £55.5/MWh, £5.6/MWh above its baseload power counterpart.
• The contract is 5.9% below its value this time last month (£59.0/MWh), and 7.3% below the same time last year when it was £62.8/MWh.

Forward curve comparison

Annual October contract

Seasonal baseload power contracts

Seasonal baseload power curve

• Seasonal baseload power contracts were down 2.0% on average.
• Winter 19 power declined 3.3% to £52.1/MWh, the lowest since 4 May 2018.

• All seasonal peak power contracts were down, falling 1.5% on average.
• Winter 19 peak power decreased 2.5% to £58.8/MWh, the lowest since 4 May 2018.

Oil and Coal

Carbon

• Brent crude oil was up 1.7% to average $59.9/bl.
• Prices were supported by news of another weekly decline in US crude stocks, which fell by 2.73mn barrels to around 438mn. However, this is still a 30mn barrel increase year-on-year.
• Norwegian investment bank DNB Markets recently lowered its forecasts for 2019 oil prices to average $66/bl (previously $73/bl), citing expectations of lower demand growth amid the global economic slowdown and higher non-OPEC production.
• API 2 coal prices fell 1.5% to average $64.0/t.
• Coal prices dropped to a two-month low of $63.5/t on 22 August, as demand remained relatively weak as cheaper gas prices and relatively high carbon prices continue to keep coal-fired power plant above gas in the GB electricity market merit order.

• EU ETS carbon prices averaged €26.3/t, down 1.8% from the previous week.
• Carbon prices dropped as low as €25.3/t at the German auction on 23 August, a two-month low.
• Ongoing uncertainty around Brexit, and speculation that a no-deal is increasingly likely, has been a key bearish price driver this month.
• The final week in August is the last week before auction volumes return to normal levels in September, with total volumes up 16% to 6.7mn EUAs despite no auction taking place on 26 August due to the UK bank holiday.

Wholesale price snaphot