Annual electricity reaches an eight-month low
Annual electricity reaches an eight-month low
Annual electricity and gas prices dropped last month as warmer weather arrived and supply concerns faded.
- A reduction in carbon, coal, gas and oil prices pulled down seasonal electricity over the month. The annual October 2013 contract fell to an eight-month low of £51.7/MWh on 30 April. Month-on-month the contract fell 1.5% to £52.9/MWh, 2% below the same period in 2012.
- Annual gas prices slipped as lower LNG demand in Asia led to increases in LNG deliveries to the UK. This alleviated the supply concerns that pushed prices up earlier in the year allowing the annual gas contract to fall 1% to a monthly average of 68.5p/th.
- Oil prices dropped below $100/bl in April following concerns about slowing economic growth in China. US month-ahead Brent crude oil was down 5% to a monthly average of $103.9/bl.
- Carbon prices fell to an all-time-low of €2.7/t on 18 April following the European Parliament’s rejection of measures back load a significant number of carbon allowances under the EU Emissions Trading Scheme.
But prices did not fall as low as some feared as demand for emissions in the power sector remained strong and German chancellor Angela Merkel made remarks about the need for a higher price for carbon.
Crude oil and annual wholesale gas and power prices graph May 2013
Short-term prices tumble as temperatures rise
The cold weather and supply concerns that plagued the country last month receded as temperatures improved and demand dropped by 20%.
Gas demand is mostly driven by domestic requirements for space heating, therefore when temperature forecasts are low prices rise. The day-ahead gas contract decreased 17% to a monthly average of 70.3p/th. Yet, despite this fall, the contract is now 20% higher than in the same period last year.
High wind speeds helped day-ahead power prices to fall by 19% as it pushed more expensive gas-fired power stations off the system. Prices averaged £51.3MWh over the month, and fell to a three-month low of £46.1/MWh on 19 April.
Spot power prices and temperatures graph May 2013
National Grid expects normal summer, but warns on low LNG supplies
National Grid published its latest Summer Outlook report on 3 April. The report looks forward over the coming months and identifies any seasonal trends the system operator expects to see. Electricity demand is expected to be similar to last year, but available generation capacity is set to be lower as a result of coal-fired power station closures required by European environmental legislation. Electricity prices could increase as a result of tighter electricity supplies.
Demand for gas is expected to be slightly higher than in recent years as more gas-fired power stations are expected to be operating. Also, more gas than usual will be pumped into storage to replenish stocks depleted during the recent cold snap. But National Grid warned LNG supply is likely to be much lower than this time last year as global demand for the resource increases.
Annual gas prices chart May 2013
Longer-term gas prices dropped as supply concerns faded following a number of LNG deliveries, coupled with a dip in the price of oil, which fell below $100/bl. On average the annual October 13 gas contract was down 1% to 68.5p/th; however, it is still 11% higher than the lows seen last summer.
Spot gas prices chart May 2013
Warmer weather has helped to reduce the pressure on the gas market, as demand for heating fell. The day-ahead gas contract decreased 17% to a monthly average of 70.3p/th. On average the contract is now 20% higher compared with the same period last year as demand for gas-fired power generation is higher following the retirement of a number of coal fired power stations.
Annual power prices graph May 2013
Annual October 13 baseload electricity was down 1% on March levels to average £52.9/MWh during April. The contract fell to an eight-month low of £51.7/MWh on 29 April.
Longer-term electricity prices have fallen as a result of low coal, gas and oil prices. Coal prices this year are on average 10% lower than last year. Coal is a major driver of electricity prices in the UK as currently around 40% of daily supply is generated in coal-fired power stations.
Spot power prices graph May 2013
Wind speeds near the end of the month rose over 3GW, and a fall in electricity demand caused by the warmer weather contributed to falling short-term power prices.
Day-ahead power dropped to a three-month low of £46.1/MWh on 19 April. Month-on-month the contract fell 19% to average £51.3MWh, although this is still 14% higher than the 2012 average.
Key energy market price indicators table May 2013
Supporting Electricity & Gas Market Price News
Environment Agency sets out CRC timetable
The Environment Agency has confirmed the dates by which companies participating in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme in 2013 must register, buy and surrender allowances.
The CRC is a mandatory scheme aimed at improving energy efficiency and cutting carbon emissions in large public and private sector organisations. Participants must report emissions by recording their consumption of electricity and gas, and purchasing allowances to cover these emissions. Over 2,000 public and private sector organisations take part in the scheme.
Last year the government set out 46 simplification measures that aimed to make the CRC less complex and costly for participating businesses. The majority of these changes will take effect at the start of the scheme?s second phase in 2014, but some will be brought into force more quickly.
In the past organisations had to report on emissions generated by their use of 29 different fuels. But the new proposals will mean organisations only have to report emissions from electricity and gas used for heating. Businesses that use very little gas (73,200kWh or less) will not be required to purchase allowances to cover their use of it.
The Environment Agency also confirmed that the Performance League Table that ranks participants in the scheme will be abolished. In its place, from 1 June, the Environment Agency will publish information on participants? energy use and emissions on an annual basis.
The allowance-related deadlines for 2013 are:
- application (ordering) period for allowances - 3 June to 31 July;
- payment period for allowances ordered - 2 September to 20 September;
- allocation period for allowances - 2 September to 15 October; and
- surrender deadline for allowances - 31 October.
The year ahead
An overview note, published by the Agency on 8 April, summarises the changes that will take effect through the government’s reforms and confirms the dates before which participants must act to ensure they are not penalised.
This year the ordering period for allowances will occur between 3 June and 31 July, with the payment period for allowances taking place during the first three weeks of September. Allowances will be allocated from the start of September to mid-October. The surrender deadline for allowances is set for the end of October.
Under the scheme one allowance must be bought and surrendered for each tonne of carbon emitted. The allowance price through to 2013-14 remains unchanged at £12/t.
Whether an organisation is required to participate in the second phase of the scheme (2014–19) will depend on its energy use in the year ending 31 March 2013. If your organisation was supplied with at least 6,000MWh of qualifying supplies of electricity through settled half hourly meters you must participate in the next phase and must register by January 2014.
From the start of the second phase of the scheme schools in England will be exempt, but all government departments will still be required to participate.
Those still obligated to take part in the scheme will see the cost of participation rise from the start of the second phase at April 2014, as the price of allowances under the scheme will increase to £16/t. From 2015-16 onwards the cost will rise in-line with Retail Price Index inflation.
This document brings together the key changes and confirms dates for registering, buying and surrendering allowances.
Government committed to renewable heat: Barker
The government will put the Renewable Heat Incentive (RHI) back on-track by increasing the subsidies businesses can receive for installing green heating technologies, climate change minister Greg Barker has confirmed.
In an interview on 22 April Barker said that financial returns for businesses installing renewable heat technologies will increase from next year as the government looks to boost the uptake of the scheme. He also hinted that the government will introduce tariffs for a wider range of renewable heat technologies.
During the interview with Businessgreen, Barker confirmed this consultation will be launched within weeks. Any changes to tariffs should come into effect from spring next year. Combined heat and power systems, heat pumps, anaerobic digestion, and energy-from-waste technologies could all be in line for support.
The non-domestic RHI, which aims to incentivise businesses to install renewable heating technologies, was launched in November 2011, but has seen low levels of uptake. To date the RHI has attracted more than 1,300 applications, with around £24mn worth of payments made in the last financial year.
Barker also insisted the government now had "a credible, sensible timetable for delivery of the policy", which will ensure the domestic part of the scheme is introduced next spring.
As the RHI ramps up and is extended to cover more technologies, the business case for deploying renewable heat technologies should become clearer.
Businesses must green up supply chains
The need to cut imported greenhouse gas emissions as well as those produced in the UK is growing, a new report by the independent Committee on Climate Change has argued.
The government’s latest statistics indicate that the UK’s greenhouse gas emissions have fallen some 20% over the last twenty years. But Reducing the UK’s Carbon Footprint and Managing Competitiveness Risks claimed that, once imports and exports are taken into account, the country’s emissions were increasing.
The report, published on 24 April, found the UK's carbon footprint (which includes emissions from the consumption of goods and services that are produced elsewhere) increased by at least 10% between 1990 and 2010.
The Committee blamed the shift to manufacturing abroad for the increase. Although it did not consider that to-date the shift had been caused by the government's energy and climate change policies, it conceded that UK energy-intensive industries could become less competitive in the future as a result of current policies.
The Committee said imported emissions needed to be measured, but it did not recommend including them in the UK's legislated carbon budgets. To reduce the UK's carbon footprint, the Committee called on businesses to act now to reduce supply chain emissions.
Even if the UK meets its emissions reduction targets at home, there is a significant challenge in reducing the levels of imported emissions.
Carbon price tumbles as back-loading proposal gets rejected
Plans to boost the price of carbon in the European Union’s Emissions Trading Scheme (EU ETS) have been rejected. MEPs voted on 16 April against delaying the auctioning of emissions allowances intended to be allocated in 2013-15 until 2018-20.
The EU ETS was designed to increase the cost of carbon and encourage businesses to invest in clean technologies. But the economic slowdown has left the market over-supplied, depressing the price and removing the incentive to cut emissions. Late last year the European Commission proposed a delay in the auctioning of 900mn allowances to re-balance supply and demand.
Following the vote, the price of carbon plummeted 43% to a record low of €2.63/t.
Electricity transmission costs set to rise
The electricity system operator National Grid published its annual five-year forecast of electricity transmission costs on 5 April.
Necessary investment in both onshore and offshore transmission assets has led to a predicted increase in forecast average demand tariffs of £3.66/kW a year (in 2013 prices). These charges, and their relative increase, vary by region with the highest costs in London and south-west England, and the lowest costs in northern Scotland.
These costs are passed on to suppliers who recover them through electricity bills.
Shale gas "no silver bullet to UK energy problems": MPs
Exploitation of UK unconventional gas reserves would strengthen the UK’s energy security but is unlikely to reduce the cost of bills, the energy and climate change select committee has said.
In a report published on 26 April, the MPs suggested the resource’s success in this country will be hindered by technological uncertainties, the proximity of operations to urban areas, and public opinion being against the method used to extract it.
The government has been supportive of the fledgling industry. But uncertainty remains over the size of the UK’s shale gas reserves. The MPs argued the government’s energy strategy cannot be based on shale gas and it’s as yet uncertain potential.
Ofgem proposes enforcement changes to boost business protection
The energy regulator has launched a consultation under its Enforcement Review to enhance regulatory safeguards for business customers and crack down on suppliers found to have adopted unfair practices.
In the document, published on 28 March, the regulator identified three strategic objectives: delivery of credible deterrence; meaningful consequences for businesses who fail consumers and do not comply; and achieving the greatest impact by targeting enforcement resources and powers. Ofgem proposes using a range of enforcement tools, including warning letters, reputational measures, and penalties.
If you want to get involved, responses to the current consultation are requested by 23 May.
Carbon Connect calls for coal station closures
Britain needs to switch from coal-fired to gas-fired power generation to help meet legislated carbon targets, according to a parliamentary think-tank.
Power from Fossil Fuels, published by Carbon Connect on 22 April, claimed switching from coal to gas is the most viable method to help reduce carbon emissions while meeting UK electricity demand.
To achieve this, the report calls for more incentives to ensure gas-fired generation is maintained at current levels. It argued that setting a target for power sector emissions intensity in 2030 would strengthen the chances of these new power stations being built and the UK securing maximum economic benefits.
Green Deal approaches 10,000 assessments
The number of Green Deal Assessments was nearing 10,000 by the end of March, government statistics have shown.
The second monthly statistics, published on 11 April, showed the number of Green Deal Assessments reached 9,268 in March – up from 1,729 at the end of February. The number of assessor organisations increased from 77 in February to 108 in March, and the number of Green Deal providers increased 20% to 48 providers at the end of March. Installer organisations continued the trend with 831 accredited at the end of March, compared to 629 at the end of February.