Energy costs: Long term prices have slumped by 8% from mid-July but short term prices have been fluctuating and have reached 6 month highs due to changeable weather patterns and continued planned and unplanned outages. Expectations for the recovery of the economy are thought to take longer than initially expected but alongside the EU recovery package, this has helped slump prices temporarily. With demand predicted to increase for cooling over the next fortnight, increasing oil and coal prices, this would increase the short term prices further. However, as the US are starting to export LNG, this should help soften prices.
Upside:
Maintainence – Planned outages at several gas-fired plants and nuclear plants continue.
Demand – UK demand continues to increase as the economy re-opens from lockdown.
Oil markets – Oil markets continue to recover in response to OPEC production cuts.
Wind output – Is likely to remain low over the next fortnight.
Weather – Weather outlook for Europe appears to be warm and dry which would increase the cooling demand across the continent.
Downside:
Gas storage – European gas storage sits at 86% fullness.
Carbon costs – EUA’s have fallen which has helped UK prices to come down.
LNG – US LNG exports are expected to rise for the first time in 6 months.
Could Go Either Way:
Sterling – Brexit negotiations have returned to the news over the last fortnight. Problems in this area will feed through to exchange rates and impact energy prices.
Non-energy costs:
On the electricity side organisations will see further increases in pass through costs from both government and industry infrastructure providers in the coming months as distribution, Electricity Market Reform (EMR),Capacity Market and Energy Intensive Industries (EII) charges are ramped up. Revised non-energy cost predictions are expected in July – delayed by the pandemic.
Climate change levy (CCL) again change on April 1st. Please see the attached pass through charge information for details. Your CCA related CCL exemption rates will change at the same time (Gas to 81%, Electricity to 92%). Please ensure your PP11 forms are updated and sent through.
Is your organisation covered by the new Streamlined Energy and Carbon Reporting (SECR) scheme?
Designed to replace in part the Carbon Reduction Commitment (CRC) which ends this year 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. Full details are attached below.
SECR will require 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.
The scheme came into effect on April 1st, 2019 and will be required to be included in the first set of accounts published for financial years starting after this date.
The scheme covers publicly quoted companies (extending their current disclosure requirements) and UK incorporated companies or LLPs with two or more of the following.
- More than 250 employees
- A turnover in excess of £36 million
- A balance sheet in excess of £18 million.
UK subsidiaries, who meet the eligibility criteria, but are covered by a parent group’s report (unless the parent group is registered outside the UK) and companies using less than 40,000 kWh of energy during the reporting year do not have to provide disclosure. Note the reporting year should be aligned to your financial year.
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 August 2020
Gas and electricity prices from 2009 to date are available here: Eneco Gas and Electricity Pricing Trends Sept 2009 to early August 2020
A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL ppkWh Updated 21.07.20
A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018
SECR: SECR EA Guidelines
