Energy costs: Markets have been moving sideways over the last couple of weeks due to colder weather for this time of year and increase in demand, various outages at power stations, drop in LNG deliveries and jittery oil markets. However, we have high gas storage levels across Europe currently at 66% full (43% increase from previous year), a slowdown in the economic growth and warmer temperatures are predicted for the second half of June to help soften the market as we approach Summer. There is also announcement of a large solar power farm to be built in Western Spain by 2022 and the UK have a commitment to cut greenhouse gas emissions including CO2 to almost zero by 2050.
Upside:
Gas maintenance – BBL gas pipeline continues its planned maintenance until July 1st. The Dutch Government is planning to bring forward an output cut 2 years early worth 38% due to the earthquakes experienced in the country.
LNG deliveries– LNG shipments continue to head towards Europe although at a slower rate.
Downside:
New Development – The new Culzean gas field in the North Sea has come online earlier and is expected to be at full production next year. It is expected to supply 5% of UK gas demand.
Strong Exports – A sharp increase in renewable capacity in France is expected over summer which will be exported to neighbouring countries like the UK.
Gas storage – Storage levels remain healthy for this time of year.
Coal markets – Coal prices continue to fall due to healthy European stocks and low global demand.
Could go either way:
Brexit/Sterling – No change here, with little prospect of an agreement in the short-term this continues to be an area of significant risk. However, if we crash out expect Sterling to devalue and prices to rise in the short-term at least.
Carbon markets – Further price hikes are possible as the market awaits a key announcement from the European Commission.
Oil prices – Oil prices have been very spikey due to the extension of production of cuts among OPEC but there have also been attacks in the Gulf of Oman which caused prices to increase again.
Wind/solar output – Strong solar output but low windy output is predicted for the second half of June.
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.
Climate change levy (CCL) increased significantly from April 1st to offset the loss of CRC to Government revenues. Please see the attached pass through charge information for details. Your CCA related CCL exemption rates will increase at the same time (Gas 78%, Electricity 93%). Please ensure your PP11 forms are updated and sent through.
Warning: more gas suppliers are passing through backdated Un-identified Gas (UIG) charges for 2017/18. Please contact us if you have any questions or unusual gas bills.
Are you eligible for an EII rebate?
In August, the Government announced a consultation to extend the existing scheme which will be concluded shortly. 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 give me a call to discuss this further. We will keep you updated with any confirmed changes to the scheme likely to feed through in the next month.
A copy of our detailed market report is available: Eneco Market Information mid June 2019
Gas and electricity prices from 2009 to date are available here: Eneco Gas and Electricity Pricing Trends Sept 2009 to mid June 2019
A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL ppkWh Updated 15.04.19
A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018
