Energy costs: Energy prices fell back slightly during the last two weeks of February as temperatures warmed and the LNG delivery schedule improved. Three shipments were unloaded overnight and as many as 20 further deliveries are expected by the end of March. Shorter term prices were volatile, particularly electricity, with supply outages at several power stations in the UK and France, alongside Norwegian gas production outages, and variable wind generation. Colder temperatures expected for the next week may support prices. However, OPEC’s discussion of a boost to oil production will offer a counterbalance.

 

Upside:

Supply outages  – The system has been plagued with outages across the UK and Europe which has produced significant volatility on short term markets. BritNed interconnector has continued to operate providing a slight offset.

Oil markets – Prices rose to $67/barrel before falling back by $3 on news of OPEC’s discussions to boost output. Other reports have indicated that prices may reach $90/barrel by the summer as western economies open up again.

Coal  – Prices reached $70/tonne amid global supply disruptions.
Gas storage – European storage is at 36%, compared to 59% this time last year.

 

Downside:

LNG – LNG deliveries are expected to be plentiful through March, with milder weather returning to Asia and the USA.
Carbon costs –
 These have fallen back by 6% amid reports that the EU plans to curb speculator activity. UK emissions will start trading in mid-May.
Weather
– Temperatures are expected to dip over the next week and wind levels variable.
Lockdown
– Gas and power demand remain dampened by the continuing UK lockdown.
National Grid – Announced the gas and electricity supply outlook for Summer 2020 looks healthy.

 

Could go either way:

Sterling – has continued to strengthen against both the Dollar and Euro shielding the UK energy markets for some of the impact of oil, coal and carbon price increases. The continued rollout of the UK’s vaccination programme will influence its future direction.

 

Non-energy costs:

On the electricity side organisations will see further increases in pass through costs from both government and industry infrastructure providers from 2022 onwards due to pandemic-related demand destruction. Levies normally collected via unit rates have fallen short of expectations and have fed through to further increases in ROs, FiTs, EII and other transportation, distribution and renewable investment charges. Targeted Charging Review will now take affect from April 1st 2022, one year later than expected, but are now being built into longer term contracts. Revised projections are available on our website via the links below.

Is your organisation covered by the new Streamlined Energy and Carbon Reporting (SECR) scheme from the Environment Agency?

Designed to replace in part the Carbon Reduction Commitment (CRC) which ended in 2019 and to follow on from the energy savings recommendations generated by ESOS compliance. Note, SECR will cover a wider scope of organisations than CRC and ESOS do. SECR requires all large enterprises to disclose within their annual financial filing obligations to Companies House, their greenhouse gas emissions, energy usage (from gas, electricity and transportation as a minimum), energy efficiency actions and progress against at least one intensity ratio.

If your organisation qualifies, participation in this scheme is mandatory. Eneco Consulting are happy to provide assistance with your regulatory obligations. Full details are available on our website on the link below.

Are you eligible for an EII rebate?

Under current rules, if you qualify at an industry sector level and your business passes the 20% electricity intensity test you may qualify for exemption to CFD and RO charges. Please see the attached Government RO/CFD guidance document and update and give Abby a call on the main number to discuss this further.

A copy of our detailed market report is available: Eneco Market Information early Mar 2021

Gas and electricity prices from 2009 to date are available here: Eneco Gas and Electricity Pricing Trends early Mar 2021

A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL with Definitions ppkWh 02.12.20

A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018

SECR: SECR EA Guidelines

TCR Charges (Targeted Charging Review): TCR Charges (Targeted Charging Review)