Summary of last months report:
Across the board increases in gas and electricity wholesale markets throughout August, with contracts seeing month on month rises. Gas and electricity prices for contracts starting winter 2018, rose by c5%.
One factor in this was the reduction in generation from renewable sources, forcing an increase in generation from more expensive but manageable sources. This is particularly felt in the near and medium term contracts such as winter 2018.
Gas has also been impacted, as the need for gas generation of electricity has put extra pressure on already tight resources. In addition to this, North sea gas has also been hindered by strikes on platforms owned by Total. These three fields account for c10% of the UK domestic gas output and by planned maintenance at UK and Norwegian fields. This left the UK under supplied by gas in the month of August.
Oil also saw rises of c5% during August with prices rising to $78/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.
September Energy Price Outlook
What to watch out for:
With European gas storage at a lower level than normal for this time of year and with only a few months before winter the market is subject to high levels of volatility should there be any unplanned outages in gas pipeline or electricity generation.
With c36% of the UK energy being imported and the ever increasing likelihood of a “no deal” Brexit, the UK would no longer be part of Europe’s internal energy market that allows energy to freely flow across the EU. Should no mechanism be in place this would force market movement.
With less than one month before the market enters the winter period there is no indications or drivers for drops in the market. In fact, any unexpected outage or supply issue will cause further increases as there is no slack in the system. Our recommendation is that end users should secure energy contracts within the next month for any start date in 2018 and 2019, as the volatility in the market may expose them to higher increases.
September News Stories
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:
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 up to 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 5 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.
The UK competition watchdog has provisionally cleared a deal that would see the two big companies join together after finding the energy firms “do not compete closely”. For more reaction to this please click here.