Summary of last months report:
Across the board, increases in gas and electricity wholesale markets continued through September with contracts seeing month on month rises, especially into 2019 start dates. For Winter 2018 start dates the market experienced in month movement but held relatively flat at the outcome with only minor increases. The below chart summarises movement in the gas market for contracts starting November 2018 during September. This chart demonstrates that having a procurement strategy is vital in order not to be caught out by rapid increases:
- The volatility in the gas market was impacted by colder temperatures, reduced supply caused by increased maintenance and limited LNG shipments. In addition, French nuclear supply interruption forced an increase in electricity generation from gas. This impacted both gas and electricity prices.
- Oil also saw rises of c5% during September with prices rising to nearly $82/barrel. In addition to OPECs position of not increasing production, these increases were driven by real concerns that supplies will be disrupted in Libya, Iran, Venezuela and Nigeria due to internal or external political pressures.
October Energy Price Outlook
Areas of concern:
With the current infrastructure issues coupled with supply and demand risks there is a real concern that costs will continue to increase during Winter. The big unknown factor is the impact weather will have on the supply industry as we have experienced highs and lows over the last months.
Our recommendation is that end users should secure energy contracts within the next month for any start date prior to in Q4 of 2018 or Q1 of 2019 as the volatility in the market may expose them to higher increases. The risk adverse may be advised to secure as far as Q2 of 2019.
October News Stories
Record share of green energy:
Renewable energy hit a record share of generation in the second quarter of 2018, reaching new highs of 31.7%. 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 and 200,000 kWhs of gas this would equate to an increase of £536 per annum in CCL alone. Certain business types and uses are exempt from CCL, please contact us to find out more.
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.