Energy Wholesale Market Review, 5 July 2019

Baseload electricity

• The day-ahead contract was 12.6% higher at £40.7/MWh, a two-week high. Day-ahead power is 28.5% lower than the same time last year (£56.9/MWh).
• Month-ahead (August) power rose 1.3% to end the week at £38.1/MWh, while September 19 power slipped 0.3% to end the week at £41.5/MWh.

• Annual October 19 power fell 2.0% week-on-week to £50.8/MWh.
• The contract is 1.8% lower than the same time last month (£51.7/MWh), and 1.9% lower than the same time last year (£51.8/MWh).

Forward curve comparison

Annual October Contract

• Day-ahead peak power jumped 17.8% to £44.8/MWh, £4.1/MWh above its baseload counterpart.
• Day-ahead peak power is 26.9% lower than the same time last year when it was £61.3/MWh.
• August 19 peak power lifted 0.4% to end the week at £41.1/MWh.

• Annual October 19 peak power dropped 2.1% to £56.3/MWh, £5.5/MWh above its baseload power counterpart.
• The contract is 2.2% below its value this time last month (£57.5/MWh), and 2.8% lower than the same time last year when it was £57.9/MWh.

Forward curve comparison

Annual October contract

Seasonal baseload power contracts

Seasonal baseload power curve

• On average, seasonal baseload power contracts were down 1.5%, mirroring their gas counterparts.
• Winter 19 power fell 2.2% to £54.0/MWh, a three-month low.
• Summer 20 power decreased 1.7% to £47.6/MWh.

• Seasonal peak power contracts dropped 1.7% on average.
• Winter 19 peak power decreased 2.8% to end the week at £60.1/MWh, £6.1/MWh below its baseload counterpart.

Oil and Coal

Carbon

• Brent crude oil fell for the first time in five weeks, down 2.0% to average $64.4/bl.
• OPEC’s decision on 1 July to extend production cuts until March 2020 was expected to support oil prices last week. However, fears of an economic slowdown have offset concerns of falling supplies and growing tensions in the Middle East.
• API 2 coal prices lifted 0.8% to average $64.9/t, ending the week at a six-week high of $67.0/t following a pickup in coal demand from India due to the arrival of a monsoon.
• However, coal demand in Germany in H119 dropped from H118 as total coal-fired power generation between January and June fell 26% year-on-year to 26.1TWh.

• EU ETS carbon prices were unchanged, averaging €26.6/t.
• Prices ended the week below €26.0/t for the first time since 24 June.
• A total of 18mn EUAs were available to auction last week, the highest this year as volumes from cancelled auctions in June were available, providing pressure on EU ETS carbon prices. However, auction volumes will be halved in August, supporting prices as market participants stockpile EUAs before next month.
• In Q319, EUAs are expected between €24-30/t, with Reuters analysts predicting an average of €27/t in the period. Support will come from lower auction volumes in August and ongoing uncertainty around Brexit, however as the Brexit deadline of 31 October approaches, pressure on carbon prices is likely.

Wholesale price snaphot