Energy Wholesale Market Review, 26 July 2019

Baseload electricity

• The day-ahead contract reversed the previous week’s decline, rising 3.3% to £41.0/MWh.
• August and September 19 power were down 2.8% and 5.3% to £39.9/MWh and £41.1/MWh respectively.

• Annual October 19 power declined by 1.7% week-on-week to £53.4/MWh.
• The contract is 3.1% higher than the same time last month (£51.8/MWh), and 2.5% above the same time last year (£52.1/MWh).

Forward curve comparison

Annual October Contract

• Day-ahead peak power was up 2.7% to £43.2/MWh, £2.2/MWh above its baseload counterpart.
• Day-ahead peak power is 28.1% lower than the same time last year when it was £60.0/MWh.
• August and September 19 peak power decreased 1.5% and 4.5% to £43.4/MWh and £44.4/MWh respectively.

• Annual October 19 peak power was down 1.5% to £59.0/MWh, remaining £5.6/MWh above its baseload power counterpart.
• The contract is 2.7% above its value this time last month (£57.5/MWh), and 1.4% higher than the same time last year when it was £58.2/MWh.

Forward curve comparison

Annual October contract

Seasonal baseload power contracts

Seasonal baseload power curve

• On average, seasonal baseload power contracts were 1.0% lower, mirroring their gas counterparts.
• Winter 19 power fell 2.6% to £56.4/MWh.
• Summer 20 power was down 0.7% at £50.3/MWh.

• Seasonal peak power contracts declined by 1.2% on average.
• Winter 19 peak power dropped 2.1% to £63.1/MWh.

Oil and Coal

Carbon

• Brent crude oil was down 2.1% to average $63.7/bl.
• Oil prices continue to be pressured by weaker global economic growth, which would result in lower demand for oil. Despite this, prices were supported by another weekly decline in US crude stocks the previous week, which pushed prices above $64/bl on Wednesday.
• Rising tensions in the Middle East between Iran and the US have also provided some uplift to prices at times, with an increase in insurance for tankers traveling in the Strait of Hormuz adding to prices.
• API 2 coal prices rose 2.3% to average $70.2/t, with prices reaching $71.2/t on 22 July, the highest since 29 April. Coal prices were supported by an increase in demand, as the heatwave in NW Europe led to higher cooling demand and nuclear outages in France pushed coal-fired generation into the generation mix.

• EU ETS carbon prices averaged €29.1/t, up 1.8%.
• Within-day carbon prices hit a 13-year high of €29.95/t on 24 July, but ended the week nearer €28/t.
• Carbon prices have been supported by lower wind generation and hotter temperatures across NW Europe, with weaker wind output leading to an increase in conventional power generation and cooling demand rising as temperatures have been above seasonal normal levels. In France, this has coincided with reduced nuclear fleet availability, further exacerbating the pickup in coal generation.
• Although the heatwave has ended, support for carbon prices will continue into August as auction volumes are due to halve to 33mn EUAs.
• Energy Aspects lifted its Q319 EUA price forecast to €27.1/t, up from €24.3/t in its previous forecast. However, it warned that a no-deal Brexit could result in prices dropping back below €20/t.

Wholesale price snaphot