Summary of last months report:
As we saw in November the prices peaked in the middle of the month of December due to the impact of temperature but did then drop. December ended slightly lower than it started across all fuels however the in year movement shows that 2018 ended higher than it started.
Gas – With November and early December being milder than forecast and the system being over supplied the gas price dropped, except for a short mid month period which saw a spike. The in month drop was c8%. Despite the demand for gas used in heating dropping there was an increase in the need for gas in electricity generation. This helped slow the decline in price and will probably continue to do so throughout January.
Power – prices in December 2018 behaved similarly to gas, although they eventually closed the month with little change month-on-month. The in month drop was c0.8%. Should forecasts be correct UK temperatures will plummet in mid to late January and this will force a greater dependence on gas fired generation.
Oil – Brent prices continued its downward trend and ended the year at c$54 /barrel. This is primarily due to weaker demand in China and the general sentiment of a slowdown in global financial markets. To counter OPEc have announced they are looking to stabilise prices, this normally means reducing output and time will tell what impact this has.
- Winter’s impact on prices is impacted harder by when the cold weather starts and finishes rather than how severe the weather gets. This year winter has started later than previous years, and so far temperatures have been generally mild.
- Last year, the wholesale market was taken by surprise with the extended winter period, it is unlikely to happen again this year because the market will be more tuned into the possibility.
December Energy Price Outlook:
Areas of concern:
The main area of concern is still weather and the markets ability to accurately factor in the weather period. If winter last longer than forecasted this will pose a threat to pricing.
Despite recent drops in the market the wholesale costs remain very high, year on year. This could lead to further drops, especially in the summer months, but with many risk factors remaining live the market is subject to increased volatility should any of these factors come into play i.e beast from the east 2. A major factor will be the weather during winter months and as has been in the last few years this is very difficult to predict.
Due to the above we would suggest all customers with contracts renewing in Q1 or Q2 of 2019 contact us to commence their renewals asap. Starting the process does not mean you have to secure now if you decide not to but you should review the option. The risk adverse should look to agree in the short term whilst the market is still in backwardation. Those with a greater appetite for risk may wish to monitor the market over the coming 6-8 weeks.
December News Stories:
Npower / SSE merger cancelled:
SSE have withdrawn from the merger with Npower, driven by market conditions and the price cap. Click here to read more on this story.
CRC and CCL:
With the Carbon Reduction Commitment (CRC) scheme being abolished in 2019 there are severe increases in Climate Change Levy (CCL) being introduced in April 2019. Whilst CRC only applied to large users CCL applies to the vast majority of users regardless of consumption levels. The increases can be seen below.
Should a business use 100,000 kWhs of electricity they would currently pay £5830 in CCL and from April this will increase to £8470. If your business is currently involved in the processing or manufacturing of ceramics, metal or glass you may me eligible to pay zero CCL. Call us now to discuss.
ESOS PHASE 2:
If your business (at group level) employs more than 250 staff or has an annual turnover greater than £38.9m with a balance sheet in excess of £33.5m you must partake in The Energy Savings Opportunity Scheme (ESOS).
ESOS requires the organisation to measure its total energy consumption, including buildings and vehicular, conduct energy audits to identify energy saving opportunities and report compliance to the Environment Agency.
Non-compliances can incur a variety of penalties from the EA. These can be upto a £50,000 fixed penalty plus £500 per day.
Compliance with the second phase of the scheme must be completed and reported to the EA by 5th December 2019.
Ginger Energy does not complete or manage the ESOS obligations for clients but we do provide large amounts of the required data and can recommend trusted partners to manage the ESOS process.